HV 
5633 


1849 


RY  RAND  HATFIELD 
5  Le  Conte  Avenue 
rkeley.  California 


ALVMNVS  BOOK  FVNO 


BOO  K-KEEPIN6 

AND 

ACCOUNTANTSHIP, 

ELEMENTARY    AND    PRACTICAL. 
IN    TWO    PARTS. 

WITH 

A   KEY   FOR   TEACHERS. 


THE  ELEMENTARY  PART  PRESENTING  ITS  PRINCIPLES  IN  AN  EASY,  CLEAR,  AND 

DEMONSTRATIVE  ORDER,  IN  STRICT  CONFORMITY  TO  THE  RECOGNISED 

PRINCIPLES    OF    TEACHING,    AS    MANIFESTED    IN    OUR    MOST 

POPULAR  SCHOOL  BOOKS. 


THE     WHOLE     BEING     ADAPTED     TO 


SCHOOLS,  SELF-INSTRUCTION,  OR  COUNTING-HOUSE  REFERENCE. 


BY    THOMAS    JONES, 

ACCOUNTANT, 

principal  of  ttje  Initiators  Counting -Hooms,  247  jBroabtoafi. 


PART  I. 


NEW     YORK: 
JOHN     WILEY,     161     BROADWAY. 

1849. 


Entered,  according  to  Act  of  Congress,  in   the  year   1849,  by 

THOMAS    JONES, 

In  the  Clerk's  Office  of  the  District  Court   for  the  Southern   District   of  New   York 


I     Cft&IQHBAD,    HU  i  IFB) 

1  li     M   I    I       .  MW     YORK. 


HF  5"6S3 


P  E  E  F  A  C  E. 


The  design  of  the  present  work  is  to  teach,  by  the  shortest  possible  process,  such 
parts  of  the  subject  of  Book-keeping  and  Accountantship  as  are  difficult  to  be 
mastered  without  a  regular  course  of  study,  as  Grammar,  Arithmetic,  or  any  other 
science. 

Great  care  has  been  taken  to  avoid  wasting  the  pupil's  energies  on  mere  matters 
of  detail,  which  require  no  teaching;  every  part  of  the  process  involves  something 
important  for  the  man  of  business  to  know,  and  which  it  would  be  almost  impossible 
to  acquire  without  previous  study. 

It  is  generally  conceded  that  the  best  school-book  is  the  one  which  presents  the 
exercises  of  the  student  according  to  the  most  logical  arrangement  of  its  elementary 
principles.  When  the  first  exercise  prepares  the  learner  to  understand  the  second, 
and  the  first  and  second  are  required  to  understand  the  third,  and  so  on,  until  the 
subject  is  exhausted,  teaching  can  go  no  further — the  rest  is  the  legitimate  work 
of  the  student.  There  are,  in  fact,  two  very  distinct  methods  of  treating  a  subject: 
the  one  by  taking  a  certain  amount  of  detail,  and  explaining  it  by  reference  to 
such  principles  as  may  happen  to  be  involved  ;  the  other,  by  analysing  the  whole 
subject,  and  giving  such  detail  as  is  necessary  to  illustrate  and  enforce  every 
principle.  In  the  one  case,  principles  are  given  to  meet  only  part  of  the  detail  ; 
in  the  other,  the  detail  is  selected  to  enforce  all  the  principles.  The  superiority 
of  the  latter  method  need  not  be  insisted  upon, — the  experienced  teacher  will 
recognise  it  as  the  great  feature  of  those  improvements  which  distinguish  our 
school-books  from  those  of  the  last  century.  The  value  of  an  exercise  is  not  to  be 
estimated  by  the  probability  of  the  question  arising  in  exactly  the  same  form  in 
practice,  but  in  proportion  as  it  serves  to  render  familiar  some  principle  of  general 
value  that  applies  as  well  to  a  thousand  cases.  We  thus  educate  the  intellect 
instead  of  encumbering  the  mind  with  useless  lumber  of  detail,  which  is  too  often 
mistaken  for  knowledge. 

The  course  of  instruction  here  laid  down  is  in  all  its  main  features  the  same  as 
appears  in  "  The  Principles  and  Practice  of  Book-keeping,"  a  former  work  of  the 
author.  Those  who  have  watched  the  progress  of  other  school-books  will  not  be 
surprised  at  the  alterations  experience  has  suggested.  A  change  so  radical  could 
scarcely  be  expected  to  be  carried  out  at  once  in  all  its  details — the  very  assumption 
of  such  self-sufficiency  on  the  part  of  an  author  ought  to  destroy  his  claim  to 
confidence.  The  advancement  of  every  branch  has  been  progressive;  and  long 
as   the   author   has  laboured  to  produce   something  as   perfect  as   possible,  he  is 


73 


warned  by  pasl  experience  to  expect  that  much  may  yel  remain  to  be  .1 
When  he  firsl  proposed  to  begin  by  teaching  the*principles  of  the  Ledger,  he 
treated  like  man)  others  who  have  dared  to  point  out  a  gross  popular  error;  but 
;i  Bhorl  period  only  elapsed,  however,  before  books  on  this  Bubjecl  began  to  multiply. 
Since  the  "Principles  and  Practice  of  Book-keeping"  was  published,  there  have 
been  more  new  books  on  the  Bubject  than  had  previously  appeared  in  half  a 
century,  and  the  whole,  have  insisted  more  or  less  on  the  propriety  of  teaching  the 
principles  of  the  Ledger  as  a  groundwork  ;  hut  not  one  of  these  authors  except 
Mr.  I!  F.  Foster  had  the  candour  to  acknowledge  with  whom  the  plan  originated 
Had  they  used  more  judiciously  what  they  bo  unceremoniously  appropriated,  other 
notice  mighl  have  been  deemed  requisite;  but  associating  them,  as  they  have  done, 
with  a  hodge-podge  of  incongi  uous  and  conflicting  matter,  any  more  particular  o< 
which  may  recognise  the  claim  of  such  books  to  .any  rivalry  with  this  could  have 
no  other  tendency  than  to  destroy  both.  The  too  prevalenl  s)  Btem  of  Book-making 
impilation  makes  it  dangerous  for  any  author  to  claim  his  own.  lot  the  public 
should  attribute  tb  him  more  than  he  would  feel  honoured  m  owning. 

Book-keeping  appears  to  have  been  much  overlooked  as  a  branch  of  education 
Few  teachers,  even  among  those  best  acquainted  with  the  theory  of  teaching, 
to  take  sufficient  interest  in  the  Bubject  to  inquire  whether  the  text-book  offered  for 
their  use  has  been  prepared  with  any  design  of  teaching  the  subject  progressively. 
An  arithmetic  that  presented  the  exercises  in  the  order  in  which  questions  would 

be  likely  to  arise  in  business  would  be  pronounced  at  once  the  extren 1  absurdity  ; 

tho>e  leasl  experienced  in  teaching  would  sec  the  necessity  of  reducing  it   to 
oider  before  the  pupil  could  take  it  up  with  any  prospect  of  success,  and  yet  the 
subject  of  Book-keeping  is   given  to  the  pupil  without   an}    arrangement  of  the 

He    is    plunged    at    once    into   the  Journal,    and    expected    to   take    it    up 

though  he  had  been   twenty  years  in  practice.     In  every  step  of  his 
progress  the  teacher  must  be  at  his  elbow  to  explain.     The  pupil  is.  in  fact,  only 

attempting    to   '_r,-t    cramm  d   with   a    certain    amount    of  entries    which    he   scarcely 

hopes  to  understand,  but  vainly  expects  that   the  variety  he  has  dealt  with  will 
furnish  sufficient  examplei   for  future  reference.     The  same  process  applied  to  an) 
other  common  branch  of  education  would  receive  qo  countenance  whatever. 
To  obviate  these  deft  cts,  and  render  even  step  <>(  the  pupil's  progress  easy  and 

crtain.  is  the  aim  of  this  work.       It    has  grOWD  out  of  fifteen  years'  constant    study 

and  practice  Iii  this  particular  branch  of  teaching!  has  been  uniformly  successful  in 
its  results,  and  the  autlior  offers  it  in  the  most  perfect  confidence  that  the  student 
who  performs  faithfully  the  exercises  given,  will  acquire  a  knowledge  of  the  subject 
inch  a-  is  seldom  attain  ■(!  even  by  the  experienced  accountant 

Few  Fork,  July  -'</,  I 


CONTENTS. 


Account  Current 

Account  Sales  . 

Analysis   . 

Annuities . 

Bill  of  Exchange 

Blank  Books    . 

Business  Transactions  for  Cash 

Journal 
Cash  Book 
Closing  Entries 
Commission   Business 
Contingent  Fund 
Compilation 
Compound  Equation  by  Interest 

"  "         by  Products 

Day  Book   (specimen  of) 
Detection  of  Errors  . 
Discount  ..... 
Equation  of  Payments  by  Interest 

"  "         by  Products 

Exchange  on  Amsterdam 

"  "    Bremen 

"  "    France 

"  "    Hamburgh 

"  "    London 

Exemplification 
Foreign  Accounts 
General  Routine 
Interest     . 
Interest  7  per  cent. 


Book  and 


IS, 


PAGE 

PAGE 

84 

Invoice  Book  ......             14 

60 

Journalizing 

48 

27 

Journalizing  Cash  Book 

66 

95 

Ledger 

23 

87 

Ledger  Analysed 

. 

28  to  33 

108 

Ledger  Exercises 

. 

34  to  38 

Monthly  Journalizing 

67 

184 

Opening  Books 

41 

13,  63 

Par  of  Exchange 

86 

22 

Per  Centages    . 

71 

56 

Partnership  Changes 

100 

190 

Part  II.    . 

183 

40 

Profits  &  Losses 

190 

79 

Porting  from  Journal 

49 

80 

Protracted  Settlements 

69 

11 

Posting    from  Sales  Book 

,    Invoice  Book 

55 

and  Day  Book . 

41 

82 

Questions  on  Equation  of  Payments 

81 

77 

"           "    Per  Centages 

72 

78 

"           "    Discount 

83 

91 

"          "     Exchange   and    Remittances             92 

91 

"          "    Annuities,      Legacies,      and 

90 

Stocks          ...             96 

90 

"          "    Settlements 

99 

87 

Settlements 

98 

9 

Single  Entry     . 

• 

104 

85 

Suspense  Account     . 

192 

68 

Speculations  in  Co.  . 

196 

73 

Stock  Accounts 

190 

75 

Trial  Balance  . 

32 

KEY     TO     PART     I. 


Answers  to  Exercises  in  Sec. 


.  II.    . 

108 

IV.     . 

114  to  124 

V.     . 

128  to  131 

VI.     . 

131 

VII.     . 

131 

VIII.     . 

132 

IX.     . 

132 

X.     . 

132 

Answers  to  Exercises  to  Sec.  XI 

Cash  Book.    Sec.  V. 
Examination  on  Balancing 
Journal  of  James  Strong  . 
Journal  Entries  of  Cash.     Sec 
Ledger  Balances 
Trial  Balances,  James  Strong 


XI. 

134 

XII. 

134  to  136 

129 

110 

115  to  124 

.  V. 

130 

110 

125 

iv  ri.i  i 

warned   by   pasl   experience  to  expect  that   much    may   yet    remain   to  be  <i 
When  he  first  proposed  to  begin  by  teaching  the*principles  of  the  Ledger,  he 

,1  like  many  others  who  have  dared  to  point  out  a  gross  popular  error:  but 

a  short  period  only  elapsed,  however,  before  I ka  "ii  this  rabject  began  to  multiply. 

Since  the  "Principles  and   Practice  of  Book-keeping"  was  published,  there  have 

been   more  Dew  1 ks  on  the   subjecl   than   had  previously  appeared  in  half  a 

century,  and  the  whole,  have  insisted  more  or  less  on  the  propriety  hing  the 

principles  of  the  Ledger  as  a  groundwork  ;   but  not  one  of  the-.-  authors  excepi 
Mr.  15.  F.  Foster  had  the  candour  t<>  acknowledge  with  whom  the  plan  oi 
Had  they  used  more  judiciously  what  they  so  unceremoniously  appropriated,  other 
notice  might  have  been  deemed  requisite;  hut  associating  them,  as  they  have  done, 
with  a  h<>d'_r<'-i"'d'_re  of  incongruous  ami  conflicting  matter,  any  more  particular  o< 
which  may  recognise  the  claim  of  such  books  to  any  rivalry  with  this  could  ' 
no  other  tendency  than  to  destroy  both.     The  t""  prevalent  system  of  Book-making 

by  compilation    makes  it  dangerous    for  any  author  to  claim  his  own,  lest   the  public 

sh«»uld  attribute  to  him  more  than  he  would  feel  honoured  in  owning. 

Book-keeping  appears  to  have  been  much  overlooked  as  a  branch  of  education 
Few  teacher-,  even  among  those  best  acquainted  with  the  theory  of  teaching,  - 
to  take  sufficient  interest  in  the  subject  to  inquire  whether  the  text-book  offered  for 
their  use  has  been  prepared  with  any  design  of  teaohing  the  subject  progressively. 
An  arithmetic  that  presented  the  exercises  in  the  order  in  which  questions  would 
be  likely  to  arise  in  business  would  he  pronounced  at  once  the  extreme  oi  absurdity  ; 
those  leasl  experienced  in  teaching  would  see  the  necessity  of  reducing  it  to  - 

order  before  the  pupil  could  take  it  up  with  any  prospect  of  BUCCess,  and  yet  the 
subject  of  Book-keeping  is  given  to  the  pupil  without  any  arrangement  of  the 
exercises.  He  is  plunged  at  once  into  the  Journal,  and  expected  to  take  it  up 
-elv  as  though  he  had  been  twenty  years  in  practice.  In  every  step  of  his 
progress  the  teacher  must  he  at  his  elbow  to  explain.  The  pupil  is.  in  fact,  only 
attempting    to    gel    cramm  d   with    a    certain    amount    of  entries    which    he    sea 

hopes  to  understand,  hut  vainly  expects  that   the  variety  he  has  dealt  with  will 
furnish  sufficient  e:  for  future  reference.     The  same  process  applied  to 

other  common  branch  of<  ducation  would  receive  do  countenance  whatever. 
To  obviate  these  defects,  and  render  even  step  of  the  pupil's  progress  easy  and 

m,  i>  the  aim  of  this  work.      It    has  grown  out  of  fifteen  years'  con-taut    study 

and  practice  in  this  particular  branch  of  teaching!  has  been  uniformly  successful  in 
.  -nit.,  anil  the  author  offers  it  in  the  most  confidence  that  the  student 

who  performs  faithfully  the  exercises  given,  will  acquire  a  knowledge  of  the  Bubject 
such  as  is  seldom  attained  even  by  the  experienced  accountant. 

JTm  }'„//.  July   •■',  is  19. 


CONTENTS. 


Account  Current 

Account  Sales . 

Analysis   . 

Annuities . 

Bill  of  Exchange 

Blank  Books    . 

Business  Transactions  for  Cash  Boo 

Journal 
Cash  Book 
Closing  Entries 
Commission   Business 
Contingent  Fund 
Compilation 
Compound  Equation  by  Interest 

"  "         by  Products 

Day  Book   (specimen  of) 
Detection  of  Errors  . 
Discount  ..... 
Equation  of  Payments  by  Interest 

"  "         by  Products 

Exchange  on  Amsterdam 

"  "    Bremen 

"  "    France 

"  "    Hamburgh 

"  "    London 

Exemplification 
Foreign  Accounts 
General  Routine 
Interest     . 
Interest  7  per  cent. 


k  and 


1-3, 


PAGE 

page 

84 

Invoice  Book  ......             14 

60 

Journalizing 

48 

27 

Journalizing  Cash  Book 

66 

95 

Ledger 

. 

23 

87 

Ledger  Analysed 

. 

28  to  33 

108 

Ledger  Exercises 

. 

34  to  38 

Monthly  Journalizing 

67 

184 

Opening  Books 

41 

13,  63 

Par  of  Exchange 

86 

22 

Per  Centages    . 

71 

56 

Partnership  Changes 

100 

190 

Part  II.    . 

183 

40 

Profits  &  Losses 

190 

79 

Potting  from  Journal 

49 

80 

Protracted  Settlements 

69 

11 

Posting    from  Sales  Book 

,    Invoice  Book 

55 

and  Day  Book  . 

41 

82 

Questions  on   Equation  of  Payments 

81 

77 

"           "    Per  Centages 

72 

78 

"           "    Discount 

83 

91 

"          "    Exchange   and    Remittances             92 

91 

"          "    Annuities,      Legacies,     and 

90 

Stocks          ...             96 

90 

"          "    Settlements 

99 

87 

Settlements 

98 

9 

Single  Entry     . 

• 

104 

85 

Suspense  Account     . 

192 

68 

Speculations  in  Co.   . 

196 

73 

Stock  Accounts 

190 

75 

Trial  Balance  . 

32 

KEY     TO     PART     I. 


Answers  to  Exercises 

in 

Sec.  II. 

108 

" 

"    IV. 

114  to  124 

" 

"      V. 

128  to  131 

" 

"     VI. 

131 

" 

"  VII. 

131 

" 

"  VIII. 

132 

«                                       (C 

"    IX. 

132 

" 

. 

"      X. 

132 

Answers  to  Exercises  to  Sec.  XI 

Cash  Book.    Sec.  V. 
Examination  on  Balancing 
Journal  of  James  Strong  . 
Journal  Entries  of  Cash.     Sec 
Ledger  Balances 
Trial  Balances,  James  Strong 


XI. 

134 

XII. 

134  to  136 

129 

110 

115  to  124 

.  V. 

130 

110 

125 

K  E  Y     TO     P  \  li  T     II. 


PA(lt 

r  n;r 

A                 1                                 • 

17:.— 177 

Joan                          lined        .        •        168 1"  17.'J 

. 

i  i:i 

■  ''  — 

. 

158 

r-liip 

. 

r    t  Qu  -i ."ii i  <  i 

■k                 . 

162  to  167 

i                 1'" 

138  to  156 

PLAN     OF     THE     WOKK. 


PART  I.  is  divided  into  12  sections  for  convenience  of  reference,  each  section  except  the 
first  embracing  an  appropriate  series  of  questions  for  exercise,  such  as,  when  performed, 
must  furnish  satisfactory  proof  that  the  student  thoroughly  understands  the  principles  involved. 
A  great  feature  of  the  work  is,  that  the  student  has  no  access  to  anything  from  which  he  can 
copy  his  exercise.     All  Journal  entries  and  answers  are  given  in  the  Key  only. 

Sec.  I.  is  an  exemplification  of  a  full  set  of  accounts,  embracing  in  very  brief  space  the 
Day  Book,  Cash  Book,  Invoice  Book,  Sales  Book,  Journal,  and  Ledger. 

Sec.  II.  is  an  analysis  of  the  arrangement  exhibited  in  Sec.  I.,  showing  the  design  and 
object  of  all  the  different  accounts,  and  enabling  the  student  to  draw  up  a  full  statement  of 
the  position  of  affairs  from  any  set  of  books  whatever. 

Sec  III.  is  designed  to  teach  the  compilation  or  reconstruction  of  what  has  been  previously 
analysed  and  mastered  as  a  plan  of  arrangement,  in  which  the  student  posts  up  a  set  of  books 
from  the  Cash  Book,  Invoice  Book,  Sales  Book,  and  Day  Book,  without  journalizing,  thereby 
giving  full  proof  of  his  knowledge  of  the  objects  of  the  different  accounts,  and  at  the  same 
time  mastering  a  system  in  very  general  practice. 

Sec  IV.  introduces  the  Journal,  Trial  Balances,  Posting,  Balancing  and  Re-opening,  with 
Commission  business,  divided  into  a  series  of  exercises. 

Sec  V.  introduces  the  Cash  Book,  with  the  process  of  Journalizing  the  Cash  monthly. 

Sec.  VI.  to  XI.  embrace  a  course  of  Commercial  Arithmetic,  comprising  such  instruction 
as  is  generally  useful  in  connexion  with  the  business  transactions  of  this  work.  Short 
methods  are  given  of  computing  Interest  and  Exchange,  of  Equating  Payments,  and  drawing 
up  foreign  Accounts  Current,  of  calculating  Compound  Interest  and  Annuities.* 

Sec  XII.  explains  the  Settlement  and  Liquidation  of  Partnerships,  and  the  manner 
of  carrying  on  Old  and  New  Books  in  connexion,  with  exercises  and  a  short  explanation 
of  Single  Entry. 

PART  II.  embraces  the  more  complicated  operations  of  Foreign  Shipping  and  Commission 
Business,  with  the  Accounts  Current,  and  all  calculations  connected  therewith.  In  addition 
to  the  Journal  given  in  the  Key  are  explanations  of  the  most  difficult  Journal  Entries,  for  the 
use  of  those  who  attempt  self-instruction.  The  first  and  second  parts,  with  the  Key,  are 
bound  together  in  one  volume,  for  the  use  of  Teachers  or  those  who  desire  to  instruct 
themselves. 

The  Ledgers  of  the  different  sets  given  for  exercise  have  been  considered  useless.  As 
the  Teacher's  Key  contains  the  Journal  and  Trial  Balances,  every  exercise  can  be  tested 
with  the  utmost  facility,  and  what  would  otherwise  have  formed  some  twenty  or  more  pages 
of  entirely  useless  Ledger  work,  is  filled  with  important  matter. 

0^7~  Blank  Books  may  also  be  had  with  the  work,  properly  prepared  for  the  several 
exercises,  and  comprising  the  necessary  directions. 


*  The  author  had  no  design  of  miking  a  substitute  for  any  of  the  Arithmetics  in  use,  but  to  offer  only  such  instruction 
as  he  has  commonly  found  it  necessary  to  give. 


D  I.  Y  I  N  1  1  I  0  N 


\«"TES     AND     ACCEPTANCES 


When  business  is  transacted  on  credit,  merchants  for  the  most  part  circulate  what  is 
I  their  own  paper,  for  example  : — If  I  buy  goods  from  A.  at  two  months'  credit,  or  in 
any  other  way  become  indebted  to  aim,  A.,  instead  of  allowing  me  to  remain  his  debt 

the  term  of  credit  agreed  upon,  talus  my  note  for  the  amount,  as  follows  : — 

$200.00  NEW  STORK,  Jan-vary  1st,  I 

Two  months  after  date,  I  promise  to  pay  to  A.  or  order  the  sum  of  two  hundred  dollars, 
fur  value  received. 

Thomas  Jones. 

Or,  which  is  the  same  thing  in  effect  but  different  in  form,  he  may  take  my  Acceptance,  in 
which  case  he  writi  B  the  document  himself,  and  addresses  it  to  me,  thus  : — 

o.oo  NEW  STORE,  .1   mary  1st,  1849. 

Two  months  after  date,  pay  to  my  order  the  sum  of  two   hundred  dollars,   for  value 
received. 

To  Mb.  Thou  A. 

.New  York. 

Or,  if  A.  reside  at  a  distance,  the  draft  may  be  presented  to  me  for  acceptance  by  a  third 
party,  to  whom  A.  is  himself  indebted,  and  then  A.  would  write,  "  Pay  to  B.  or  order."  In 
this  oase,  an  ft  id  to  be  in  B.'s  favour. 

In  order  to  render  the  draft  negotiable,  it  is  now  necessary  thai  I  accept  it  by  writing 
-  it-  face  the  word  ■•  Accepted,"  and  affixing  my  signature.     1  then  resign  it  to  the 

in  whose  favour  it  is  drawn. 

Hence,  the  difference  of  th  ■   firms  is,   thai   when   I   give  my   note,   I    in  effect 

voluntarily  say  I  will  pay  ;  and  when  1  give  mj  acceptance,  I      ■••  an  affirmative  answer  to 

the  drawer,  who  Mys,  will  you  paj    \ 

My   Notes  and   Accept  e  called   Bills   Payable,  as  I   musl  provide  for  them  at 

maturity.  And,  as  other  men's  Notes  and  Acceptances  uiu-t  pass  through  my  hands  in  the 
course  of  business,  I  distinguish  them  by  the  term  "  Hills  Receivable,"  i 

their  amount  at  maturity. 

'J'1"  and  Ace,-  ,\  i,y  merchants  in  the  place  of  money,  but  subject 

■  inn  in  proportion  to  the  time  they  have  to  run. 
Thus,  suppose  I  take  A.'s  i               1,000  to  the  City  Bank,  the  said  Note  having  thirty 
days  to  run,  provided  the  responsibility  of  A.  and  myaeff  h  l  *hall,om 

up  the  .Note,  pe.  ive  in  C             .         .         .         .*                .  117 

Allowing  a  discount  of 5.88 

11,000.00 


PART     I 


SECTION     I. 


EXEMPLIFICATION. 


Book-keeping  implies  a  systematic  arrangement  of  mercantile  transactions,  the  purpose 
of  which  is  to  afford  at  all  times  ready  access  to  the  Resources  and  Liabilities  of  the  party 
whose  operations  are  recorded,  thus  : 


Resources. 

Liabilities. 

Cash 

Bills  Receivable 
George  Irving  owes 
Ira  Per  ego         " 

5,850 

3,800 

1,000 

500 

Bills  Payable,  outstanding 
7  orce  James  Blackwell 

Total  Resources,          11,150 
"      Liabilities,           4,000 

3,000 
1,000 

My  present  worth  is 

7,150 

$11,150 

$11,150 

Each  particular  item  of  the  above  forms  the  subject  of  an  "account"  (see  definitions); 
thus  there  is  one  account  of  Cash,  another  account  of  Bills  Receivable,  another  of  Bills 
Payable,  another  for  James  Blackwell  ;  so  that  the  statement  of  Resources  and  Liabilities 
can  at  any  time  be  drawn  up  by  reference  to  the  book  of  accounts  called  the  Ledger,  and 
the  whole  art  of  Book-keeping  is  merged  in  the  peculiar  arrangement  of  this  book. 

There  are  but  two  methods  of  Book-keeping  in  use,  the  one  called  Single,  and  the  other 
Double  Entry. 

Single  Entry  affords  only  the  above  statement ;  but  when  accounts  have  been  arranged  by 
Double  Entry,'  they  enable  us,  by  additional  accounts,  to  draw  up  another  statement,  viz.  of 
the  Profits  and  Losses  resulting  from  the  same  operations,  for  example  : — 


Losses. 


Profits. 


On  Railroad  Stock                                       850 
Business  Expenses                               579 
Total  Gain                               2,579 
Total  Loss                                1,429 

On 

a 

n 

Merchandise 
Bank  Stock 
Exchange 

Net   Profit                                    1,150 

$2,579 

• 

Capital  at  commencement 
Net  Profit 

• 

Present  worth 

• 

< 

5 

1,950 
500 
129 


$2,579 


6,000 
1,150 

$7,150 


SEC.  ^EXEMPLIFICATION. 

Hence  Douhle  Entry  embraces  particular  account!  of  "  Rail  R.  B 

to  furnish  each  item  in  the  latter  statement,  thus  developing  the  present  worth 

iting  the  other,  and  constituting  what  U 

balance  of  the  I 

The  grand  pr  ibli  m  then  presented  in  B  ok-keeping  f  >r  our  analysis  is  its  plan  of  arrange- 
ment; and  this  plan,  so  far  s  nerd  features  are  considered  in  the  sj 
mained  unaltered  since  its  6.r%t  promulgation  as  the  Italian  met! 
The  manner  of  recording  tr              is  before  they  are  arranged  in  the  Ledger  varies  in 
almost  every  different  business,  but  this  variation  presents  no  difficulty  whatever  when  the 
different  accounts  of  the  Ledger  are  understood,  inasmuch  as  they  are  mere 

time,  which  comm  to  to  all  who  understand  what  they  are  aiming  to 

iplish, — for  example:    Everj    Ledger   imposes   upon   us  the   nee 
ler  all  Cash  receipts,  so  as  to  show  the  total    imount  received  during  the  year. 

were  firs!  recorded  on  a  Day  Book  indiscriminately  with  other  transactions, 
they  must  he  separated  again,  and  copied  (ported)  into  the  Ledger  singly,  perhaps  making 
thirty  or  more  items  •  d  i  v<  ry  day — but  let  all  tin  se  Cash  receipts  be  omitted  on  the 

and  recorded  only  <>n  a  book  called  the  Cadi  Book,  the  total  amount  received  can 
every  month,  and  passed  to  the  Ledger  in  one  sum,  making  only  twelve  sums  to 
carry  into  the  Ledger  instead  of  several  thousands.     The  Ledger,  then,  h  I  and 

unalterable  plan  ;  the  subordinate  books  are  varied  in  every  business  with  especial  reference 
to   that   plan.      With  a  Cull    knowledge  of  t!  .    the   suhordinate   modifications  will   be 

appreciated  in  proportion  as  they  save  time  and  labor  ;  but,  to  those  ignorant  of  tin;  L 
appears  a  different  system. 
In  modem   practice  it   is  common  to  have  four  principal  books,  into  which  the  original 
entries  distributed,  viz: — 

'Idie  Cash  Book,  on  which  are  <  ntered  all  transactions  of  receiving  or  paying  Cash. 
The  Invoice  Book,  on  which  are  entered  all  transactions  of  buying  Merchandise. 
The  Sales  Book,  <>n  which  are  entered  all  transactions  of  sidling  Merchandil 
The  Bay  Book,  on  which  are  entered  all  transactions  for  which  no  particular  book  is 
i         led. 

Prom  tl:  the  Journal  and   Ledger  are  compiled,  and  it  is  this  process  of  compila- 

tion or  arrangement  that  constitutes  the  art  and  science  of  Book-keeping. 

The  .Jiiitritu/  is  used  to  digi  st  and  prepare  the  matter  <d"  the  foregoing  hooks,  in  conformity 
to  the  plan  of  the  Ledger;  a  knowledge  of  the  latter  hook  is,  therefore,  indispensable  in 
undertaking  the  compilation  o/the  Journal. 

the  grand   hook  of  accounts,   in  which    is   carried   out  the  particular  ol 
of  all    the    other    hooks  :     here    the    whole    arrangement    is    comphted    which    furnishes    the" 

statement  of  Resources,  Liabilities,  Gains,  and  L 

In   addition   to  these   principal    books,    which    include   every  transaction    that   takes    ; 

there  are  other  books  used  to  ncord  details  ;  for  example,  although  the  notes  Receivable  and 

lered  with  the  [nvoii  die.,  it  is  oecessarj  to  have  a  convenient  record 

of  their  dates,  when  due,  and  other  particular-,  and  tor  this  purpose  the  Bill  kept. 

It  would  he  idle  to  attempt  to  particularize  all  the  Mem.  |;  i  iks  of  this  nature  that   merchants 

require  :  each  d<  \  i»     fa-  his  own  purp 

We  shall  now  proceed  to  exemplify  all  tin-  :.  n posing  the  set  enumerated,   the 

Journal  ami  Li  dg<  r  being  complete  ;  but  the  Invoice  Book,  Sal  -  I!  ok,  Cash  Book,  and  Day 

mens  only  of  their  form  .     To  <  nemplify  the  details  in  full  lor  three  months' 

mid  occupy  too  much  space,  without  answering  an}  useful  purpose,  as  there  is 

nothing  to  he  learnt  from  their  continuation. 

This  exemplification,  however,  must  be  looked  upon  only  as  the  subject  to  he  explained  by 
the  i-  i  the  two  follow  ;  the  anal}  otion  II.  will  render 

the  whole  arrangement  of  the  Ledger  dear  and  simple,  and  tl  -  in  compilation  in 

Seetioii  III.  will  give  the  maMi-rdo-v  to  the  Journal  ;   hut,  without  this,  the  whole  process  will 

appear  n  and  complicated. 


ID 


DAY  BOOK. 

NEW  YORK,  January  1st,  1848. 


I  have  this  day  taken  a  statement  of  my   Resources  and  Liabilities,   in 
accordance  with  which  I  make  the  following  entry  : — 


Sundries  to  Sundries. 
Cash  for  this  amt.  on  hand    ..... 
Bills  Receivable  for  this  amt.  of  notes  on  hand 
John  Wilson  owes  me  on  acct.       .... 
Bank  Stock  for  70  Shares  in  Eagle  Bank 
Merchandise  for  this  amt.  at  present  value 

Total  Resources     . 

To  Bills  Payable  for  my  notes  outstanding 
"    William  Brown  for  this  amt.  I  owe  him 
"   Stock  for  my  net  Capital    . 


10th 


5,857.13 
3,827.36 
1,875.80 
7,000.00 
3,500.00 


$22,060.29 


William  Brown  to  Bills  Payable 

For  my  note  @  30  days,  due  10th  Fcb'y 
18th  


Bills  Receivable  to  John  Wilson 

Rec'd  his  note  dated  15th 
20th 


2  mos. 


John   Wilson  to  Charges 
For  Cartage 
"    Labour 
"    Postages 


3.50 
3.50 
1.00 


22,060 


500 


800 


24 

23 

82 

29 


00 


00 


00 


The  foregoing  transactions,  it  will  be  perceived,  are  such  only  as  could  not  be  entered  on 
the  Invoice  Book,  Sales  Book,  or  Cash  Book.  In  most  cases  it  is  considered  waste  of  time  to 
enter  such  transactions  on  this  book  as  already  appear  on  the  books  named,  from  whence 
they  can  be  copied  into  the  Journal  as  readily  as  if  they  appeared  here.  The  note  given  to 
William  Brown  could  not  be  entered  on  the  Invoice  Book,  because  we  designed  keeping  an 
open  account  with  him  ;  so  on  the  Invoice  Book  we  made  an  entry  merely  to  credit  him  with 
the  goods — and  now  the  entry  on  the  Day  Book  charges  him  with  the  note.  But,  in  other 
cases,  where  we  did  not  wish  an  open  account  on  the  Ledger  with  the  parties  from  whom 
we  bought,  we  recorded  the  note  given  on  the  Invoice  Book,  so  that  no  Ledger  account  may 
be  opened  with  the  sellers  of  the  goods. 

These  observations  are  not  for  the  beginner  ;  they  will  be  appreciated  when  he  has 
mastered  Sec.  III.  The  whole  of  this  section  is  a  mere  exemplification  of  the  subject  to  be 
taught,  on  the  same  principle  that  we  would  first  show  the  picture  or  model  of  a  complicated 
machine,  and  then  proceed  to  explain  the  relation  of  the  several  parts  to  the  whole. 


SEC.  [.-EXEMPLIFICATION. 


Dm. 


CASH. 


Jul). 


Feb. 


1 
8 
- 

15 
18 

•J! 


7316 

6453 
46 

*734 


6 
in 
10 

12 


.   Wilson 
•■  M  •  h  indise 

■  ivahlc 
"  Merchandise 
"  Bills  Rea  ivable 


To  Balance 
•■  John  Wilson 


Ann.  oo  hand 
K . ■".!  on  account 
J  unes  ]  Hack 
John  W.  Whal 

Bedell 
Richard  B.  Clifford' 


Brought  down 

red  on  account 


The  above  aempllfiec  the  manner  of  •  I  me  during  <>ne 

month,  v.  nil  the  cnmmi  no  meni  ol  the  next    It  \\'\\\  be  understood  by  the  student 
when  he  h^  arrived  at  Exercise  l.  Section  111. 


Mr.  Thomas  Jones, 


INVOICE    BOOK. 

New  Xork,  Jan.  2,  L848. 

Boh  of  William  Brown. 


ps.  Poult  do  Soie 
«  Blk.  Silk  Velvet 
boxes  Ribbons 
ps.  Printed  Silk  Handkerchiefs 


B46J  yds.  65 
180J  "  200 
120  ps.        1124 


10th 


f727 


Albert  R.  Raymond, 

One  case  25  ps.  Super.  Blk.  Cloth,  561}  yds.  @  $3.60 

Settled  by  note  8  nios.  due  Sept.  13th. 

Carried  forward 


*  No.  ou  cuch  ploce. 


12 


22  1 

360 

185 

30 


T    !:; 

9i: 
I  i  00 
•i  52 
1,00 


M..-..-.7 


13 


00 


759  08 


2,020 


50 


CASH  BOOK. 


UUJNTK.A. 

Cr. 

Jan. 

o 
O 

10 
12 

18 
20 
25 
31 

250 

200 

200 

73 

100 

50 

20 

23 

25 

24 

5 

By  Charges                               Paid  for  fuel 
"  Merchandise                        Bo't  of  Houghton  &  Arnold 
"   Charges                                 Paid  Cartage 
"  Bills  Payable                        "     Note  of  Dec.  15th 
"  Merchandise                        Bo't  of   Htn.  &  Ard. 
"   Charges                               Paid  for  labour 
"  Balance                               Carried  down 

$ 

54 

996 

32 

874 

1,576 

25 

6,998 

00 
74 
43 

20 
50 

18 
08 

10,557 

13 

• 

112 
250 
450 

182 

1 

50 
00 
00 
50 

74 

74 

00 
00 
00 

01) 
01) 
00 
00 
50 
50 

2,779 
1,690 

458 
1354 
1355 
1870 

INVOICE   BOOK. 

Jan'y  10th. 

Bro't  forward 
Houghton  &  Arnold, 

Gross  Twist  Vest  Buttons,            18  lines                          45 

"         "      Coat       "                   34     "                           125 

"          «          "           "                    36     "                            225 

"         "  Overcoat   "                   45     "                           250 

Box  and  Cartage 

Paid  in  Cash  (see  above)   . 

58 

990 

1,000 
450 
240 

575 
600 
280 
120 

1 

Albert  R.  Raymond, 
Bales  Blk.  Wadding  each  40  dz.,              4,000  dz.        25 
"     White                   "     40    "                2,000    «         22^ 
"         "                        "  600  yds.,         12,000  yds.        2 

Settled  by  note  8  mos.  due  16th  Sept. 

00 

64 
214 

875 
876 

Houghton  Sf  Arnold, 

Gross  Fancy  Back  Combs                                            25.00 

"          "            "           "                                                24.00 

Doz.    Shell         "           «                                                 20.00 

"         "            "           "                                                24.00 

Box  and  Cartage 

Paid  in  Cash     ..... 

1,576 

4,469 

58 

13 


SEC  .   I.    I'M  HI  •  IFN  ITION,    INVOH  E  BOOK. 

i 


i 


s 


a 


.     8 
.     < 


61  j    • 

\ 

2Sth    


S.N 


i 
•     l  ••  |    ••  3.13J 

64  1     ••    88   •• 

•     C     :i.  •'  "  '     " 


M         81. 

.]  «.K>l»it  to  Merchandise 


Ml 


;;  ]  - 


125 

11  • 


71 


•   006    IB  nth  :    *      -    >     •  ■   1    '  the 

.  much  its  form  and  management.     Its  -  plain 

r  the  quantities,  qualities,  and  pr  aight, 

\  inge  an  invoice  jud 

v  different  line 

il»it  in  relation  to  the  articles  dealt  in  ;  but  the 

the  form  of  \n\  uad  the 

;rr  in  its  objects,  that  one  example  is  sufficient.     The 

;  but  it  is  generally  i  .titer 

th  particulars  <>f  the  articles  and  Those 

i  in  the  outer  column,  as  the  trans  Dtered 

i  is  intended   t.>  remind   the   Book-keeper  thai  such 

\-vv.si  to  the  1.  there  bj  another  channel,  vi 

Ca>  -  will  be  fully  understood  after  performing  the  Bj  S  otton  111. 


1  > 


I  .  [.-EXEMPLIFICATION.    SALES  BOOK. 

NEW  YORK,  J, 


0 
14 


' 


570  :>'* 

i 


./•■'.a  ir.   H" 

M 


~>     cts. 


note  4  mo.,  doe 
9tb    


"    Oil-. 


3.10 

3.50 

4.05 


! 


ed  in  Cash. 


12th 


Charles  Fl 
ps.  f  Linen  B 
-    f  Ir:    .  L 





15 


11 


his  note  6  mo.,  due  Jul 
15:?i    


"    :OJl. 

half  chests  You 

tan  13       • 


: 


W7, 

Prints 
■■■■     Bl'k  &  \Vht.  " 


I 

.'    3 
2304    ::    6£ 

/  ."      ■    7 


' 


in  Cash. 
20th    


: 

— 


Thomas  Frc 

\ere 


10 


.ncy 


185       •    1.75 


J  his  note  8  mo.,  due  July  23d. 

Carried  forward 


' 


:  15 


-.-  - 


■ 


a 


15 


SEC.   [.—EXEMPLIFICATION.     SALES   BOOK. 

m:\\  v 


P  IT 

11     i::;:  iu 


10 


- 


2*th  


r 
i 


M  Gros  d    R  .  tie 

•ived  his  note  3  m-  1 . 

Total  Cr 


Tb*  hum  r^trnrk.   npr'  t     The 

- 
111. 


1'. 


• 


I    J" 





SEC.  I.-EXEMPLIFICATIOX.    BILL  BOOK. 


BILLS   RECEIVABLE. 


When 
Deceived. 

Jan 

5 

u 

12 

It 

18 

M 

20 

<< 

•24 

« 

28 

Ou  Account  of 


John  W.  Whalley 

Charles  Fletcher 
Jno.  Wilson 
Thomas  Franklin 
James  Johnston 
William  F.  Sands 


On  Whom 
Drawn. 


Himself 


Date. 

Term. 

Jan.     5 

4  mo. 

"      12 

6     " 

<«      15 

2     « 

"     20 

6     - 

••     24 

4     " 

"     28 

3    " 

When 
Due. 


.May  8 
July  1^ 
Mar.lri 
July  23 

May  27 
May    1 


Amount. 


10(32.50 
1961.15 
800.00 
U7*.35 
2023.51 
1252.73 


When  and  How  Disposed  of. 


BILLS   PAYABLE. 


When 

When 

No. 

Accepted. 

On  Account  of 

Payable  To. 

Date. 

Term. 

Due. 

Amount 

When  and  How  Redeemed. 

1 

Jan.  10 

WilliamBrown 

His  Order 

Jan.     8 

30  days 

Feb.  10 

500.00 

2 

"     10 

A.R.Raymond 

it             l. 

"      10 

8  mo. 

Sep.  13 

2020.50 

3 

"     13 

U         ((                   (( 

It              It 

"      13 

8  " 

"     16 

1690.00 

4 

"     25 

it      it            a 

It              It 

"     25 

3  « 

Apr.  2  8 

951.32 

5 

«     28 

Daniel  O.  Gibb 

It          It 

"     28 

2  " 

Mar.31 

1162.50 

There  are  other  forms  of  Bill  Book.  A  very  general  one  is  to  haye  twelve  additional 
columns,  one  for  each  month  in  the  year,  to  show  when  each  note  matures  ;  so  that  every  date 
appearing  in  the  column  for  March,  for  example,  would  indicate  at  a  glance  what  notes 
matured  that  month.  Forms  for  Bill  Books  may  be  found  at  any  stationer's,  and  their 
respective  advantages  compared  ;  the  above  will  suffice  to  show  their  general  purpose. 


Note — At  each  period  of  balancing,  or  as  often  as  convenient,  it  is  common  to  compare  the  Notes  Receivable  on  hand  with 
those  shown  in  the  Bill  Book :  but  the  author  of  the  "North  American  Accountant"  bases  the  greater  part  of  bis  pretensions 
on  an  improved  Bill  Book,  in  which  he  h  is  a  money  column  for  the  notes  received,  and  another  tor  those  disposed  of;  and 
sever  il  times  in  the  year  he  proposes  to  re  enter  all  the  notes  on  hind  anew,  and  balance  the  old  account.  Now  there  can  In' 
no  doubt  that  the  notes  on  hand,  added  to  those  disposed  of.  will  balance  the  account,  and  render  an  error  in  Bills  Receivable 
account  almost  impossible  :  indeed,  we  can  scarcely  imagine  what  the  next  adventurer  can  ofier  in  the  way  of  improvement, 
short  of  koepins:  two  sets  of  books  and  two  book-keepers  We  only  wonder  he  should  omit  to  suggest  this  at  unco,  since 
accuracy  may  be  purchased  at  the  trifling  expense  of  makine  the  same  entry  three  or  four  times  over,  (or  this  must  be  the  case 
with  merchants  who  take  eight  months'  piper,  and  not  a  few  have  three  or  four  hundred  notes  constantly  on  band. 

The  same  author,  oblivious  we  must  suppose  of  the  law  of  copyright,  claims  to  have  exemplified  all  modem  improvements  in 
the  science  ;  to  which  he  adds  certain  of  his  own,  viz  re-writing  the  Bill  Book  three  or  four  times,  putting  no  cyphers  in  the  cent 
columns  where  they  represent  nothing,  and  contracting  debts  in  London  at  8  per  cent,  premium  and  paying  them  at  par.  as  we 
shall  show  hereafter.  The  author  of  the  "  North  American  Accountant"  must  be  a  philosopher.  He  must  surely  be  deemed 
a  lover  of  truth  who  appropriates  all  he  can  find  in  "modern  improvements,"  no  matter  with  whom  they  originated,  and  who 
takes  three  or  four  times  the  ordinary  trouble  to  arrive  at  it. 


17 


SEC.  I.— EXEMPLIFICATION. 
NEW   FORK,   J  i     ,1848. 


Drs. 


Crs. 


MI 


Sundries  to  Sundrit  r, 
For  opening  the  following  accounts  aa  per  statement  of  ro) 
trees  and  Liabilities  entered  on  Day  B 


Cash  for  this  amount  on  hand  .... 

Bills  Receivable  "  "     . 

John  Wilson  owes  me  on  account    . 

Bank  Stock,  for  this  amount  at  present  value    . 

.1/-  rchandise  ....... 

To  Hills  Payable,  my  own  notes  outstanding 

•■    William  Brown,  I  owe  him 

■•   stark,  for  my  net '  iapital 


William  Brovm 


For  my  note  at  30  days. 


To  ft/7/.v  Payable, 


2?i7Zs  Rcccivablr  . 

To  John   Wilson 
Received  his  note  at  two  months. 


John    Wilson       .... 
To  Charge* 
For  Cartage,  Labour,  and  Postages. 


Cash  to  Sundries        ...... 

Por  the  following  amounts  reed,  this  month,  as  per  Cash 
Book. 

To  John    Wilson,  on  account  ..... 

Mi  rt  hnii'lisr,  cash  sales  ..... 

"    /y///.v  Receivable,  matured        .... 


'•••'■''  thaofhi  bet»  r  to  oral)  pwtteuhu  datei  in  tbii  BmnpUflnHon 

u  well  u  -.„„■  other  mutton  of  minor  detail,  n tfecl  belnf  to  iu  the  attention 

on  polnti  <ii  more  general  import  ina 


18 


5,851 

1,875 

7. 

8,500 


.-.on 


-mi 


4,700 


mi 


(Id 


mi 


in. 


5,848 

1,575 

1  1,641 


500 


-no 


•Jl 
32 


mi 


00 


mi 


850 
1,850 
2,500 


00 
mi 
no 


JOURNAL. 

NEW  YORK,  January,  1848. 


Drs. 


Crs. 


Sundries  to  Cash         ....... 

For  the  following  sums  paid  this  month,  as  per  Cash  Book. 
*Charges  paid  for  fuel  .....  54.00 

"  "      "   cartage     . 

"  "      "   labour      . 

Total  debit  of  charges  acct. 
Merchandise,  cash  purchases 
Bills  Payable,  matured 


32.43 
25.18 


Merchandise  to  Sundries 
For  goods  purchased  this  month,  as  per  I.  B. 
To  William  Brown,  on  account    . 
"    Bills  Payable,  my  own  notes  issued 


Sundries  to  Merchandise 
For  goods  sold  this  month,  as  per  Sales  Book. 
John  Wilson,  on  account 
Bills  Receivable,  for  notes  received 

February. 


Cash  to  Sundries 
For  the  following  received  this  month  as 
To  John  Wilson,  on  account 
"  Merchandise,  cash  sales 
"   Interest,  on  notes  discounted    . 
"    Bank  Stock,  received  dividend 
"   Bills  Receivable,  notes  matured 


C.  B. 


Sundries  to  Cash         .... 
r  payments  this  month  as  ^  C.  B. 
Merchandise,  cash  purchases 
yiUs  Receivable,  notes  discounted 
'ofit  fy  Loss,  loss  on  uncurrent  money 
"  "      broken  bank  bills 


"get, 


rent  of  premises 
Stationer's  bill 
Carpenter's  bill 
Cartage 
Labour 


3.50 
25.00 

500.00 

136.00 

32.78 

25.30 

50.00 


Total  debit  of  Charges  Acct. 
able,  my  own  notes  redeemed 


all  these  payments  for  charges  together  the  amount  is  passed 
dger  Acct.  of  Charges,  the  object  being  to  show  on  the  debit  of 
amount  of  this  class  of  expenditures. 


Ill 

2,573 

874 


7,384 


587 
6,978 


4,875 


1,500 
3,000 

28 


744 
5,354 


50 


00 


3,559 


1,560 

5,824 


7,565 


800 

1,350 

30 

125 
2,570 


lf>,626 


05 


24 

82 


74 


00 
00 
00 
00 
00 


58 


19 


SEC.  I.-EXEMPLIFICATION. 

\i;\V     FORK,     l'KKKIARY,    1848. 


Drs.  Crs. 


hiinilisr  to  Sundries 
For  purchases  this  month  as  f}  Invoice  Book. 
To  Bills  Payable,  t;>>'  my  notes  given   . 
"  Joint  Wilson,  on  account 


Sundries  to  Merchandise      .... 

sold  this  month,  as  '{■>  S.  B. 
B    i  /.'■■•    table,  this  amount  of  notes  received 

William  Bmu-n.  sold  him  on  account    . 


ii/7/.v  llrrrivable  .... 

'/'<<  William  Brown 

For  his  acceptance  of  my  draft  of  this  aim  unit. 


John  Wilson       ...... 

To  Bills  Payable 
For  my  acceptance  of  his  draft  for  this  amount. 


John  Wilson 


To  Charges  for  cartage  .   5.20 

"   labour  .  3.50 

"         "         "   cooperage     .  4.23 


William  Brown  . 


Cash  to  Sundries 

For  n  ceipts  tins  n th,  as  )t  < !ash  Book 

To  Bills  Receivable,  notes  matured 
"      "  "  »     discounted 

"  Merchandise,  oath  sales 
"    S,  M.  Richardson^  on  account 


To  Charges  for  labour  L5.20 

"  "         "    postages         .   1.58 

March. 


7.1I!» 


7,340 
1,150 


1,581 


791 


22 


.-).-, 


(Ml 


l'J 


93 


10 


78 


12,702 


I- 


8,845.20 
5,354.00 


20 


6,124  .".7 
1,325  32 


11,490  46 


1,581 


791 


09 


12 


93 


in  78 


9,19 :. 
2,158 


•.'I  i 

28 

no 


JOURNAL. 


NEW  YORK,  March,  1848. 


Drs. 


Crs. 


Sundries  to  Cash  .... 

For  payments  this  month,  as  <p  Cash  Book 
Bills  Payable,  my  notes  matured 


Charges  for 


Merchandise    " 


Profit  Sf  Loss 


Clerks'  Salaries 

Labour 

Desks  &  Fixtures 

Cartage 

Cash  Purchases 

Duties  on  do. 

Insurance    . 

Protest  on  Note 


G.  L.  Morgan,  on  Account 
Interest,  Discount  on  Notes 


300.00 
29.35 

530.28 
15.27 

584.00 
53.00 

T35TJ0 
1.75 


Merchandise  to  Sundries       . 
For  goods  purchased  this  month,  as  <p  I.  B. 
To  Bills  Payable,  for  my  notes  issued  . 
"  Bills  Receivable,  other  men's  notes  disposed  of 
"  G.  L.  Morgan,  on  credit 


Sundries  to  Merchandise 
For  goods  sold  this  month,  as  ^  Sales  Book. 
S.  M.  Richardson,  on  account 
Bills  Receivable,  for  notes  received 


Bills  Receivable  .... 

To  S.  M.  Ricliardson 
For  his  note  of  this  amount. 


Interest      ......... 

To  Bills  Receivable 
For   this    amount  allowed  as  discount   on    notes    passed   to 
Haggerty,  Draper  &  Jones. 


G.  L.  Morgan    . 

To  Bilk  Payable 
For  my  note  of  this  amount. 


Merchandise       ... 

To  S.  M.  Richardson 
For  deduction  on  damaged  goods. 


7,583 

874 
637 

136 

1,253 

23 

11,144 


4,260 
6,120 


1,500 


52 


1,800 


00 


40 


00 


24 


10,508  43 


4,230 
3,379 
3,534 


10,380 


1,500 


52 


1,800 


00 

^0 
20 


00 


00 


40 


00 


24 


21 


SEC.  L— EXEMPLIFICATION.    JOURNAL. 
\T.w  FORK,  Ha*  a,  1848.  Drs. 


Crs. 


Profit  <S-  Loss     ...... 

To  Bills  Receivable 
For  this  amount  Lost  an  Win.  Brovn's  note. 


Mercliandisc       ........ 

To  Profit  4-  Loss 
For  profit  realized  on  former  aoot.,  which  is  hereby  trans- 
ferred to  the  latter  account. 


Bank  Stock         .  .  .  .  . 

'  To  Profit  \  Loss 
For  profit  on  former  account. 


Profit  Sf  Loss      .... 
To  Charges 
For  loss  on  latter  account  to  date. 


Profit  Sf  Loss     . 

To  Interest 

For  loss  on  latter  account. 


Profit  fy  Loss     ....... 

To  Stock     .  .  .  . 

For  net  gain  in  business  transferred  to  latter  account. 


This  journal  has  been  represented  as  made  monthly,  but 
a  journal  made  daily  would  present  precisely  the  same 
features.  Consider  the  business  herein  exemplified  as  thai 
of  three  days,   instead   of  three  months,  and  you  have  the 

exact   daily    pit* 


574  33 


7,324 


574 


33 


:t:.i ; 


on 


n.-, 


75 


350 


T.-» 


1,092 


45 


5,202 


88 


01 


1,692 


l.-i 


— 


94 


10 


5,202 


40 


SEC.  I.-EXEMPLIFICATION.    LEDGER. 


Dr. 


CASH. 


Cr. 


1648 

Jan. 

cc 

Feb. 

Mar. 


To  Sundries 


To  Old  Acct. 


5,857 

4,700 

4,875 

12,702 


28,134 


3,440 


1848 
Jan. 
Feb. 
Mar. 


By  Sundries 


"    New  Account 


*  The  l)l;ink  column  is  used 
to  insert  opposite  euch  item  the 
Journal  page. 


3,559 
10,626 
10,508 

3,440 


28,134 


05 

5H 
13 
55 

61 


Dr. 

MERCHANDISE. 

Cr. 

1843 

1848 

Jan. 

To  Sundries 

3,500 

00 

Jan. 

By  Cash      .... 

1,850 

00 

" 

"    Cash       .... 

2,573 

24 

(c 

"    Sundries     . 

7,565 

74 

a 

"    Sundries 

7,384 

56 

Feb. 

"    Cash      .     . 

1,350 

oi) 

Feb. 

"    Cash       .... 

1,500 

00 

it 

"    Sundries     . 

11,490 

46 

tt 

"    Sundries 

7,449 

89 

Mar. 

"    Cash       .      . 

2,153 

•J  8 

Mar. 

"    Cash       .... 

637 

00 

it 

"    Sundries 

10,380 

00 

a 

"    Sundries 

11,144 

00 

a 

"    New  Account 

6,729 

50 

a 

"    S.  M.  Richardson 

6 

24 

it 

"   Profit  fy  Loss  .     . 
To  Old  Acct.    .     .     . 

$ 

7,324 

05 

$ 

41,518 

98 

41,518 

98 

6,729  50 

Dr. 

BILLS 

RECEIVABLE. 

Cr. 

1848 

1848 

Jan. 

To  Sundries     .     .     . 

3,827 

36 

Jan. 

By  Cash      .... 

2,500 

00 

tt 

"    John  Wilson    . 

800 

00 

Feb. 

it        it 

2,570 

00 

tt 

"    Merchandise    . 

6,978 

24 

Mar. 

n         n 

9,199 

20 

Feb. 

"    Cash       .... 

3,000 

00 

tt 

"    Merchandise 

3,379 

80 

K 

"    Merchandise    . 

7,340 

22 

u 

"    Interest  . 

52 

40 

tt 

"    William  Brown    . 

1,531 

55 

a 

"    Profit  &  Loss 

574 

33 

Mar. 

"    Merchandise    . 

6,120 

00 

a 

"    Neio  Account 

12,821 

04 

it 

"    S.  M.  Richardson 
To  Old  Acct.   .     .     . 

$ 

1,500 

00 
37 
64 

$ 

31,097 

31,097 

37 

12,821 

Dr. 

PROFIT 

&  LOSS. 

Cr. 

1848 

1848 

Feb. 

To  Cash      .... 

28 

50 

Mar. 

By  Merchandise 

7,324 

05 

Mar. 

tt      a 

136 

75 

u 

"    Bank  Stock  .     .     . 

356 

75 

u 

"    William  Brown    . 

574 

33 

^^,-- 

tt 

"    Charges 

1,692 

88 

^-^ 

It 

"    Interest .... 

45 

94 

^^ 

a 

"    Stock     .... 

$ 

5,202 

40 

80 

^^ 

$ 

7,680 

7,680 

80 

23 


Dr. 


SEC.  I.-EXEMPL1FICATION. 

WILLIAM    BROWN. 


Cr. 


1848 
Jan. 


T  •  Bills  Payable 
••    Merch 


5 it  i 

4,150  24 
16  78 


4,661  02 


1848 
Jan. 

Feb. 


••    \|.  rchandisi 
••    Bills  L  <  ■  ivable 


1,575  23 
l,5fl 


1,531 


4,667 


12 


Dr. 


SI'orK. 


1-1- 


To  Nvir  Account 


Dk. 


•s 

lit. -11 

1-1- 
.1  hi. 
Mar. 

Ap'l 

19,844 

By  Sundries 
••'   ProJU  \  I. 


By  Old  Account    . 


BILLS    PAYABLE. 


'I   32 
2  Pi 

19,84 


L9,e ; 


c  . 


1-1- 

.1  .11. 
Feb. 
Mar. 


To  Cash 


0  Account 


L848 

874 

20 

Jan. 

5,35  I 

00 

(I 

7,583 

00 

(< 

11,302 

02 

Feb. 

K 

Mir. 

* 

CI 

25,113 

22 

Bj  Sundries     . 

William  Brtra  □ 

Merchandise    . 
ii 

John  Wilson     . 
Mi  rchand 
(l.  L.  Morgan 


By  Old  Account 


5,824  32 

6,124  .".7 

791  09 

4,230  tii) 

oil 


1,800 
25,113 


<: 


Dr. 


CllARCLS. 


Ck. 


l-l- 
Jan. 
Feb. 
Mar. 


ill  (M 
7  1  1  <>- 
--  |  90 


1,730  •")'.» 


1848 

Jan. 

Feb. 
ic 

Mar. 


By  John  Wilson     . 
(i 

••    William  Brown 
••    Profit  &■  Lou  . 


8 

12 

16 

1,692 


00 
09 

78 

38 


Dr. 


S.   M.   men  IRDSON. 


Cr. 


i-i- 
Mar. 


To  Merchandise 


00 


i-l- 
Mar. 


By  Cash      .     .     . 
•■    Bills  R  iceh  able 
"    Merchandise 


1,85 
1,50 


Dr. 


i-i- 

M.ir.  To  Cash      .     . 
•■    Bills  Payable 

34 


G.   L.   MORG  W. 


1,800  00 


i-  I- 
Mar. 


i: .   Mi  rohandise 


Cr. 


3,584  20 


Dr. 


LEDGER. 

JOHN  WILSON. 


Cr. 


1848 
Jan. 


Feb. 


To  Sundries     . 
"    Charges 
"    Merchandise 
"    Bills  Payable 
"    Charges 


1848 

1,875 

80 

Jan. 

8 

00 

11 

587 

50 

Feb. 

791 

09 

a 

12 

93 
32 

$3,275 

By  Bills  Receivable 
"    Cash       .     .     . 


"    Merchandise 


800  00 
850  00 
00 
32 


800 
1,325 


$3,275 


32 


Dr. 


INTEREST. 


Cr. 


1848 
Mar. 


To  Cash      .     .     . 
"    Bills  Receivable 


23 
52 

54 

40 
94 

1848 
Feb. 
Mar. 

$75 

By  Cash       .     . 
"    Profit  Sf  Loss 


30 

45 


$75 


00 
94 
94 


Dr. 


BANK  STOCK. 


Cr. 


1848 

Jan. 

Mar. 


To  Sundries 
"   Profit  $f  Loss 

To  Old  Acct.   . 


7,000 
356 


7,356 


$7,231 


1848 
Feb. 
Mar. 


By  Cash       . 
"    New  Acct. 


125 

7,231 


$7,356 


00 

75 

75 


25 


SECTION     II. 

ANALYSIS. 

The  Journal  and  Ledger,  as  exemplified,  will  be  found  obscured  by  much  technicality ; 
for  Book-keeping,  like  most  other  sciences,  has  adopted  a  language  of  its  own,  to  avoid 
circumlocution ;  and  this  conventional  phraseology  often  produces  in  the  mind  of  the  tyro,  in 
his  attempt  to  analyse  the  process,  ideas  entirely  remote  from  those  the  same  phrases  would 
convey  to  the  accountant.  For  example :  we  find  "  Cash  to  Sundries,"  or  "  Cash  Dr.  to 
Sundries,"  which,  to  an  ordinary  reader,  would  seem  to  intimate  that  cash,  in  some  way, 
must  owe  sundry  things.  Now  the  word  sundries  means  several  ledger  accounts,  and  the 
whole  meaning  of  the  phrase  is,  that  one  debit  item  belonging  to  the  cash  account  equals 
several  credit  items  belonging  to  other  accounts. 

The  Ledger,  as  before  intimated,  is  the  principal  book  of  a  system  of  accounts.  It  is  a 
well  contrived  series  of  classified  items,  affording  ready  access  to  the  sum  total  of  each 
important  class  of  facts.  For  example  :  if  we  would  know  what  amount  of  notes  we  have 
issued  we  have  only  to  turn  to  the  account  headed  "  Bills  Payable  "  and  add  the  right  hand 
column,  or  for  the  amount  redeemed  add  the  left  hand  column,  and  it  is  obvious  that  a 
comparison  of  these  two  totals  shows  what  amount  is  unredeemed  or  outstanding.  Each 
account  in  the  Ledger  has  a  settled  plan  of  arrangement,  which  cannot  be  deviated  from. 
The  left  hand  column  of  an  account  is  called  the  Debtor  (Dr.)  column,  and  the  right  the 
Creditor  (Cr.)  column;  but  the  technical  manner  of  using  these  terms  is  apt  to  occasion  the 
learner  much  perplexity.  It  may  appear  to  a  beginner  that  Bills  Payable  ought  to  be 
credited  when  a  note  is  redeemed,  or  that  Cash  ought  to  be  credited  when  it  is  received ;  but 
he  must  be  content  for  the  present  to  hear  and  learn  what  is  done,  and  so  qualify  himself  to 
appreciate  why  it  ought  to  be  done.  It  is  very  easy  to  learn  what  is  to  be  recorded  as  Dr. 
or  Cr.  in  any  account,  and  when  the  whole  plan  of  the  accounts  is  seen  and  appreciated  all 
will  appear  harmonious  and  consistent.  Every  business  transaction  requires  us  to  pass  two 
or  more  items  to  different  accounts  in  the  Ledger.  To  enter  these  items  then  into  the  Ledger 
at  once  would  lead  to  inconvenience  and  difficulty,  as  in  case  of  mistake  we  could  not  review 
the  entries  of  any  one  transaction  ;  they  would  be  in  several  parts  of  the  Ledger,  and  we 
should  have  no  direct  means  of  finding  them  all  again,  and  testing  their  accuracy.  To 
obviate  this  defect  a  Journal  is  kept  of  the  Debit  and  Credit  items  assigned  to  the  Ledger  for 
each  transaction,  in  the  order  of  its  date.  Thus  if  we  bought,  Jan.  5th,  a  quantity  of 
merchandise,  for  which  we  paid  cash  $500,  our  Ledger  requires .  that  we  should  credit  cash 
account  with  the  cash  paid,  and  debit  merchandise  account  with  the  cost  of  merchandise,  and 
we  record  on  the  Journal, 

Jan.  5, 
Merchandise         .....         500 

To  Cash 500 

Thus  for  this  transaction  we  assign  two  items  to  the  Ledger,  which  are  copied  (posted)  into 
their  proper  accounts  ;  and  consequently  the  Journal  is  a  record  of  all  entries  passed  to  the 
Ledger,  each  transaction  under  its  proper  date. 

Journalizing,  then,  is  the  art  of  assigning  its  proper  place  in  the  Ledger  to  each  item  in  a 
transaction.  To  know  the  pi'oper  place  is  to  know  the  laws,  principles,  and  objects  of  each 
account,  and  a  false  journal  entry  can  only  be  proved  false  by  showing  its  want  of  conformity 
to  some  principle  of  the  Ledger.  We  therefore  proceed  to  explain  the  preceding  Ledger,  in 
such  a  manner  as  will  render  its  laws  and  principles  manifest  and  simple;  but  we  must 
divest  it  of  all  technical  references,  and  direct  attention  only  to  its  prominent  featui^s  of 
utility,  so  that  it  may  be  clearly  demonstrated  what  accounts  are  required,  and  in  what  cases 
they  are  to  be  debited  or  credited. 

27 


LEDGER. — Primary  Accounts. 


Receipts. 

CASH. 

Payments 

On  hand  commencing 

1  ■!  since 

Total  r<  • 

4. Till) 
4,875 

12,702 

13 
00 

IN) 

46 

3,556 
10,626 

10,506 

05 

Prom  ■nut  received 

it.  duct  p  .iJ  out 

Balance  on  Imnil 

This  Balance  is  Resources 

.   •-'-  KU.nl 
.  24.i  : 

•3,441 

43 

108,134 

61 

Received. 

BILLS  RECEIVABLE. 

1              ;d  of 

On  hand  commencii 
1  Bd  -~ince 

>g 

Mill 

3,000 
7,340 
1,531 
6,120 

1  ,500 

3D 

00 

94 

22 

00 

00 
37 

Disposed  of 

Total  received  . 
disposed  ni' 

31,097.37 

18,275.73 

■J'HMI 

2,570 

3,379 

574 

INI 
00 

90 

411 

Total  received 

Balance  on  hand     . 

112.821  64 

This  lialancc  is  Resources. 

REDEEiMED. 

BILLS 

PAYABLE. 

Issued 

5.:i:.4 

20 
00 
00 

Outstanding  at  commencement 
Subsequently  Issued 

Total  issued      .... 

:.,-i:i 

500 
5,824 
6,124 

791 

4.2:io 
[,800 

34 

32 

Total  issued 
"     redeemed 

Balance  unredeemed 

.2.-1.113.22 
.  13  -n  90 

..7 
Oil 
00 
(Ml 

This  Balance  it  Liabilities. 

. 

Dr. 

.Hi TIN  WILSON. 

Cr 

1,875 

8 

5-7 

791 

12 

80 
IK) 
5(1 
09 
93 

32 

My  accountability  to  him 
This  Account  is  Sittlnl. 

800 
350 

.-1,11 

00 
00 

11(1 

32 

His  accountability  to  me 

*:!,--•';.-. 

.>::.•_•:;, 

32 



Dr. 


WILLIAM  BROWN. 


Cr. 


Dr. 


4,150 
16 


S4,ti07 


This  Jlecount  is  also  8tttl*d. 


S.  M.   IlirilAlinsON. 


tcconntable  to  me  1 

1  am  accountable  n>  him        .    -j    .     1 

Balance  owing  mo  .      .      .  91,403.70 


4,2GO 


This  Balance  is  Resources. 


1,575 
1,560 
1,531 


Cr. 


1,350 


De. 


This  Balance  it  Liabilities. 
28 


C.    I,.    MolHSAN. 


I. -nil 


Mi  acconntablllty  to  him 
Hu  accountanilit]  1 

iiai  hut  due  bim  .      . 


3,053  21 

5.  Ml '.Mi 


(',;. 


3,534 


LEDGER. — Secondary  Accounts. 
STOCK. 


Capital  commencing 
To  Capital 
Add  Net  Gain 


14,641.82 
5,202.40 


My  present  worth  is         $19,844.22 


Outlay. 


MERCHANDISE. 


Returns. 


Value  of  goods  commenc 
Cost  of  goods  purchased 

From  total  returns  . 
Deduct  total  outlay 

ing 

3.500 

2,573 

7,384 

1,500 

7,449 

037 

11,144 

6 

00 
24 
56 
00 
89 
00 
00 
24 

Value  of  goods  unsold,  or 

This  anticipated   returns 
sources. 

anticipated 
is    also  Re- 

1,850 
7,565 
1.350 

11,490 
2,153 

10,380 

00 
74 
00 
46 

28 
00 

50 

34,194.93 

41,518 

98 

Profit 

1,324.05 

ICf5*"  See  Profit  Sr  Loss. 

Outlay. 


CHARGES. 


Returns. 


Business  Expenses 


111 

744 

874 


Collected  back  or  charged  to  others 


Total  outlay 
"     returns 


.     1,73059 
37.71 

.  $1,092  88 


Outlay. 


INTEREST. 


Returns. 


Interest  paid  or  payable  , 


23 
52 

54 
40 

94 

75 

Interest  received  or  receivable 


From  outlay 
Deduct  returns 


Outlay. 

BANK 

STOCK.                                        Returns 

Value  at  commencement 
Total  returns    . 

.    7.356.75 
.    7,000.00 
.     $356.75 

7,000 

00 

Value  of  Stock  ending,  or  anticipated 

Total  returns 
The  anticipated  returns  are  Resources. 

125 

7,231 
.$7,356 

00 

75 

"      outlay 

75 

Profit    . 

Losses. 

PROFIT  &  LOSS. 

Profits 

Sundry  Losses  and  Expenditures  . 

28 

136 

574 

1,692 

45 

50 
75 
33 

88 
94 

Profit  by  Merchandise 
"        Bank  Stock 

Total  gain  . 

From  total  gain 
Deduct  total  loss 

.    7.6S0.H0 
.     2,478.40 

7,324 
356 

05 
75 

$7,680 

80 

"        Interest        "             ... 

Net  gain 

.  $5,202.40 

£3^"  See  Stock  Account. 

29 


I      II.— ANALYSIS. 

\  \  A  L\  sis    OF    Til  E     LEDG  l.\l 

CASH     U3COI  NT. 
In  |  |        nit  are  collected  together,  <>n  the  left  hand  or  debit  side,  the  amount 

isfa  oo  band,  ooromeociog,  together  with  every  subsequent  receipt,  and  in  the  right  hand 
or  credit  column,  the  amount  at  payment : 

The  total  debits  .....     28,1  •  l  "-1 

Ami  the  total  credits  or  payments        .....     24,694.06 
main  on  hand     .... 

Hence  the  *         A      'lint  slwaj  the  amount  of  8  » in  Cash. 

BILLS    RECEIVABLE  S  P. 

In  this  account  arc  collected  together,  on  the  debit  side,  the  amount  of  other  mi  i'sN 
ami  Acceptances  on  hand  commencing,  and  all  subsequently  received  ;  and.  on  the  credit 
Bide,  all  disposed  of: 

The  total  amount  received  b  .....     81,00737 

And  the  total  amount  disposed  of        .....     l->.07">.7:* 

There  must  be  on  hand mj.--ji.<u 

.  by  this  arrangement  of  tin-  Hills  Receivable,  the  balance  of  the  acoount  always  shows 
the  amount  of  Resources  in  other  men's  N  \ 

BILLS    PAYABLE    ACCOUNT. 

In  this  a'  I,  on  the  credit  side,  the  amount  of  ourownN  oeptances 

outstanding  at  the  commencement,  and  all  subsequently  issued  or  accepted  (see  Dofiniti 

and  01)  the  debit  side,  all  redeemed  or  taken  up. 

The  total  amount  issued  being    ......     25,113.22 

redeemed  being 13,81  L.20 

There  must  be  outstanding        .  .  .  .  J.n-J 

Hence  the  balance  of  this   account   always   shows   the  amount  of  Notes  outstandj 

Liabilities. 

PERSON  \L    \< '<•<>!  NTS. 

the  debit  side  of  John  Wilson's  account  are  collected  all  sums  for  which  be  has  h. . 
accountable  or  indebted  to  me;  and  on  the  credit  side,  all  sums  for  which  I  have  become 
tuntable  or  indebted  to  biro  ;  and,  as  both  sides  are  equal,  the  acoount  is  settled. 

William  Brown's  account  is  also  settled. 

s.  M.  Richardson's  account  shows,  on  the  debit  side,  that  he  is  accountable 

to  in,. 4,260.00 

And,  on  the  Credit  aide,  that  I  am  accountable  to  him       .  .  .  .  . 

Consequently  he  owes  me  ........  *i.io:t.7(i 

<;.  L.  M                        i  shows,  on  the  oredil  aide,  that  I  am  accountable 
to  him 8,58  I 

And,  00   the  debit  side,   tliat   be   is  lien  mutable  to  me  ..... 

quently  I  <>"<•  him     .         .         .         .         .         .         .         .     $480 

ler  this  arrangement,  the  balance  of  a  personal  account  always  shows  whether  he 
us  or  we  owe  bun  and  the  balance  is  B  ir  Liabilitii   .  as  the  i  see  ma}  be. 


SEC.  II -ANALYSIS. 

Accounts  with  Banks,  Firms,  or  Corporate  Institutions,  with  whom  we  may  do  business, 
are  all  to  be  understood  as  included  in  the  term  Persona]  Accounts;  for  example — the  nature 
of  the  account  is  the  same  whether  E.  8.  Houghton,  or  Houghton  &  Arnold,  or  North  River 
Bank  owes  us. 

The  accounts  already  explained,  viz.  Cash,  Bills  Receivable,  Bills  Payable,  and  Personal 
Accounts,  constitute  one  entire  set,  which  we  denominate  Pbimabv  Accounts. 

These,  together  with  the  estimated  value  of  property  unsold,  enable  u.s  to  make  a  full 
statement  01  Resources  and  Liabilities';  and,  consequently,  to  determine  the  present  worth 
of  the  parties  whose  operations  they  record. 

We  must  now  explain  a  distinct  kind  of  accounts,  which  show  how  much  the  business 
commenced  with,  and  how  much  it  has  gained  since  ;  the  sum  of  the  two  being  its  present 
worth. 

Thus,  if  the  business  commenced  with  t  14,041 ,82 

And  gained  in  its  subsequent  operations        ....       5,202.40 

Its  present  worth  must  be $19,844.22 

But  the  accounts  already  examined  show  its  present  worth,  viz: — 

Total  Resources 31,027.20 

"      Liabilities 11,782.98 

Present  worth 819,844.22 

Double  Entry,  then,  embraces  these  two  distinct  kinds  of  accounts,  from  each  of  which  we 
can  deduce  the  present  worth  ;  and  when  both  agree  the  books  are  said  to  balance. 

The  first  set  we  have  already  denominated  Primary  Accounts.  Those  we  now  proceed 
to  explain  we  denominate  Secondary  Accounts. 

The  Stock  Account  show's  on  the  Credit  side  what  the  business  commenced  with. 

Note. — Any  capital  withdrawn  would  appear  on  the  Debit  side  of  Stock. 

The  Merchandise  Account  shows  on  the  Debit  side  the  value  of  goods  on  hand  commenc- 
ing, and  the  cost  of  all  subsequent  purchs 

The  Credit  side  shows  all  returns  or  sales  of  said  goods,  to  which  is  added  the  value  of 
goods  on  hand  at  the  end. 


Thus  the  Sales  amount  to 
Anticipated  Returns  of  goods  unsold 

Total  Returns 
"      Cost       ... 

Profit  on  Merchandise  Account 


34,789.48 
0,729.50 

41,518.98 
34,194.93 

87,324.05 


Hence  we  can  always  find  the  Profit  or  Loss  on  the  Merchandise  Account  by  valuing 
goods  unsold,  adding  that  value  to  the  Credit  side,  and  taking  the  difference.  If  the  Debit 
side  be  the  greater  it  is  Loss  ;   if  the  Credit,  Profit. 

The  Charges  Account  shows  on  the  Debit  side  all  the  ordinary  business  expenses  ;  such 
as  Clerks'  Salaries,  Rent,  Postages,  Fuel,  Cartage,  Labour,  &c.  ;  and  the  Credit  side  shows 
the  returns  this  expenditure  has  made  by  our  collecting  the  said  Postages,  Labour,  or 
Cartage,  &c,  back  from  customers. 

The  Expenditures  amount  to     .....  1,730.59 

"     Returns  "     .  " 37.71 

And  the  Loss 81,092.88 

The  Interest  Account  shows  on  the  Debit  side  all  sums  paid  or  payable  for  Interest,  and 

the  Credit  side  all  sums  received  or  receivable.     Hence  the  balance  is  our  Gain  or  Loss  by 

Interest. 

31 


SEC.  II.-ANALYSIS. 


The  Outlay  is 
"     Returns 

And  the  Loss 


75.94 
30.00 

845.94 


The  Bank  Stock  Account  shows  on  the  Debit  side  all  Bank  Stock  has  cost  us,  and  on  tlie 
Credit  side  all  the  returns,  to  which  we  add  the  present  value,  or  anticipated  returns. 


The  Returns  are 

"     Anticipated  Returns 

Total  Returns 
Cost    . 

The  Profit  is 


125.no 
7,231.75 

7,356.75 
7,000.00 

56.76 


The  Profit  &  Loss  Account  shows  on  the  Debit  side  all  miscellaneous  expenditures  or 
losses  occurring  in  the  course  of  the  business,  for  which  no  particular  account  has  been 
provided  ;  and  at  the  end  of  the  business  we  bring  in  all  the  Losses  shown  on  other  accounts. 
The  Credit  side  shows  all  miscellaneous  returns  or  Gains  accruing  in  the  course  of  the 
business,  for  which  we  have  provided  no  particular  account,  and  at  the  end  we  bring  in  all 
Gains  shown  on  other  accounts.  The  balance  of  this  account,  therefore,  shows  our  net  Gain 
in  business. 

The  total  Gains  are  .... 


"       "     Losses  " 

"     net  Gain  is 
Which  if  added  to  our  first  capital 

Gives  our  present  worth  . 


7,680.80 
2,478.40 

5,202.40 
14,641.82 

$19,844.22 


Hence  the  Secondary  Accounts  (Stock  excepted)  are  arranged  to  show  our  Gains  or 
Losses;  the  debits  showing  our  expenditure,  outlay,  or  losses, — and  the  credits,  returns  or 
gains;  and  as  many  of  such  accounts  may  be  kept  as  the  nature  of  the  business  requires, 
any  article  we  do  not  wish  to  exhibit  the  gain  or  loss  on  separately  we  may  include  in  the 
title  Merchandise  ;  but  if  we  operate  largely  in  tobacco,  for  example,  and  wish  to  see  the 
result,  we  show  the  outlay  and  returns  in  an  account  headed  "  Tobacco." 

When  we  wish  to  give  a  brief  representation  of  the  state  of  each  ledger  account  we  adopt 
the  form  of  what  accountants  call  a  trial  balance,  which  consists  of  the  title  of  each  account, 
with  the  sum  total  of  each  side.  For  example,  the  following  gives  a  concise  view  of  the 
foregoing  ledger  : 

TRIAL  BALANCE. 


•j-.i:u.(il 
81,007.37 

13,811.20 
4,200.00 
3,053.24 

34,l!M.o:< 
1,780.50 

07.-».  !U 

7,000.00 

7  80. 58 

$124,097.46* 


Cash 

Bills  Receivable 
Bills  Payable   . 
S.  M.  Richardson 
( ;.  L.  Morgan 
Stock 

Merchandise    . 
( lharges  . 
Interest   . 
Bunk  Stock 
Profil  A   Loss  . 


2  1.0111.00 

18,275.78 

25, 113.22 

2,856.24 

8,584.20 

1  L,641.82 

84,788. 18 

87.71 

80.00 

125.00 


8124,007.  io 


♦  Th.-  total  i »'i'H  Him 1. 1  ..I.  Hi.-  I.,  daw  alwayi  .  quail  tba  tola]  Oradlt  matter,  tha  raaaon  <>i  which  mil  appeal  in  Boo.  in 


SEC.  II -ANALYSIS. 


Now  the  Merchandise  unsold  being  valued  at  $6,729.50,  and  the  Bank  Stock  at  $7,231.75, 
we  are  prepared  to  draw  up  the  following  Analysis,  or  Balance  Sheet : 
ANALYSIS  OF  FOREGOING  LEDGER. 


Resources. 

Liabilities. 

Cash         ...... 

receipts 

28,134.61 

tt             ...... 

payments          24,694.06 

k                                ... 

on  hand 

3,440.55 

.Bills  Receivable         .... 

received 

31,097.37 

it             "    it 

disposed 

of       18,275.73 

tt                 a 

on  hand 

12,821.64 

Bills  Fay  able    ...... 

issued 

25,113.22 

(<          << 

redeemec 
unredeer 

I          13,811.20 

«          tt 

ned 

11,302.02 

S.  M.  Richardson  is  accountable  to  us 

4,260.00 

We  are  accountable  to  him 

2,856.24 

"    "            "         He  owes  us 

1,403.76 

G.  L.  Morgan.     We  are  accountable  to  him 

3,534.20 

"    "          "            He  is  accountable  to  us 

. 

3,053.24 

"    "          "            We  owe  him     . 

480.96 

Merchandise  on  hand  valued  at    . 

. 

6,729.50 

Bank  Stock      "      "         "        «    . 

. 

7,231.75 

Our  original  capital  was 

*14,641.82 

"     subsequent  gain  is 

5,202.40 

"     present  worth  is  . 

. 

*$ 

19,844.22 

31,627,20 

31,627.20 

Losses. 

Gains. 

Merchandise      .         .         .         .         . 

sales 

34,789.48 

« 

on  hand 

6,729.50 

• 

41,518.98 

Cost 

34,194.93 

7,324.05 

Charges    ...... 

outlay 

1,730.59 

cc 

returns 

Loss 

37.71 

1,692.88 

Liter  est     ...... 

outlay 

75.94 

tt 

returns 
Loss 

30.00 

45.94 

Bank  Stock        ..... 

returns 

125.00 

ic                .«                                        .... 

on  hand 

7,231.75 

7,356.75 

Cost 
Gain 

7,000.00 

356.75 

Profit  fy  Loss    ..... 

debit  pos 
Total  ga 

tings 

in           7,680.80 

739.58 

"      los 
Net  gain 

s            2,478.40 

5,202.40 

$ 

7,680,80 

7,680.^0 

*  This  Is  a  neat  way  of  showing  briefly  that  the  sum  of  the  original  capital  and  gains  equals  the  difference  between  the 
resources  and  liabilities.  It  require!,  however,  to  be  carefully  noticed  and  understood.  It  must  be  obvious  that  the  difference 
between  the  resources  and  liabilities,  if  added  to  the  liabilities,  must  make  an  amount  equal  to  the  resources;  for  it  is  only 
the  smaller  sum  added  to  the  ditierence  which  must  make  the  greater.  Now  in  place  of  the  difference  we  substitute  the  capital 
added  to  the  gain,  and  as  we  find  it  answer  the  same  purpose  by  making  it  balance,  it  must  be  one  and  the  same  sum. 

5  33 


SEC.  II.-ANALYSIS. 

The  student  would  do  well  to  pause  here,  and  reflect  a  little  on  the  simplicity  of  tlie 
account  presented  by  the  Book-keeper  in  the  preceding  Analysis.  He  has  been  recording, 
we  will  suppose,  the  business  of  twelve  months,  embracing  perhaps  five  thousand  transactions 
or  changes  that  have  been  effected  in  the  state  of  affairs  from  day  to  day  ;  and  what  story 
does  he  come  with  to  convince  us  that  he  has  faithfully  performed  his  trust  ?  He  can  say,  in 
presenting  his  statement  to  you — You  put  me  in  charge  of  your  Cash  ;  here  is  an  account 
of  every  dollar  put  into  my  hands,  and  of  every  dollar  I  paid  out :  if  you  would  test  it, 
examine  the  transactions,  and  see  that  each  receipt  and  payment  is  included.  The  balance 
remaining  in  my  hands  is  in  the  Resources ;  count  the  Cash  in  your  Till  and  in  Bank,  and 
you  will  find  it  agree.  Here  is  also  an  account  of  all  the  Notes  Receivable  that  have  passed 
through  my  hands,  the  amount  received  and  the  amount  disposed  of.  The  balance  on  hand 
is  in  your  Resources  ;  tell  over  the  Notes  on  hand,  and  you  will  find  tliem  agree.  And  so 
on  with  each  separate  account.  From  what  would  appear  in  detail  a  confused  and 
conglomerated  mass  of  interminable  chaffering  and  changing,  he  presents  a  statement  so 
clear  and  so  readily  substantiated,  that  it  must  at  once  defy  all  cavil.  Human  ingenuity 
could  devise  nothing  more  simple,  and  the  arrangement  of  Double  Entry  can  only  appear  a 
complicated  process  to  those  who  have  never  been  at  the  pains  to  examine  its  general  features, 
or  had  the  good  fortune  to  be  placed  on  the  right  track  of  investigation  ;  who  plunge  into  a 
fog  and  involve  themselves  in  a  labyrinth  of  detail,  unprovided  with  chart  or  compass  by 
which  they  may  fix  upon  a  single  point ;  all  is  confusion,  because  nothing  has  been  previously 
generalized,  and  no  plan  of  operations  considered. 


EXERCISE   I. 

My  Book-keeper  presents  me  the  following  statement  of  my  Ledger  accounts  at  this  time  ; 
that  is,  each  side  of  the  several  accounts  has  been  added,  and  the  totals  copied  down. 


25,280 

12,500 

2,000 

3,000 

1,000 

Cash   . 
Bills  Receivable 
Bills  Payable    . 
L.  B.  Binsse  &  Co. 
Geo.  Tredwell 

13,575 
7,500 
7,000 
3,500 

10,840 
7,850 

Stock  . 
Merchandise 
Ship  Jane 

18,000 

10,630 

1,640 

1,835 
976 

Charges    . 
Interest     . 
Profit  &  Loss* 

500 

2,500 

436 

$65,281 

$65,28 1 

I  have  taken  an   inventory  of  Merchandise  on  hand,  and  value  it  at  $1,000.      I  also  value 
the  Ship  Jane  at  87.(1011. 

Required  an  Analysis  of  the  above,  showing  my  Resources,  Liabilities,  Cains,  Losses  and 

at  Worth. 


i  Mi  if  -in  In  Profit  fc  Loh  la  lone  reform  of  tha  bndnan  r..r  uiii.-h  no  paiftariu  htaiHni  ot  ■moobI  baa  i n  nmvMad. 

for  example:  we  may  receive  i Idebt  which  wai  considered  loat,  or  «  n  abate nl  from  Rome  mini',  account 

™"  "'•'■'"»»  m*5    'i  "hay.  del fa  i i,r  nature  for  example:  we  roaj  U  m ij  by  broken  bank  notes  or  depreciated 

papar,  duiiia  earapromlaed,  abatemenu  on  account!  rendered,  and  ntriou  other  »m\- 


34 


SEC.   II.-ANALYSIS. 

ANALYSIS  OF  EXERCISE  I. 

Primary  Accounts. 


Cash, 
c< 

<( 

Bills  Receivable. 
k  « 

u  tt 

Bills  Payable. 

U  «( 

«  (( 

L.B.  Binsse  fy  Co 


Geo.  Tredwell. 
Merchandise. 
Ship  Jane. 


Amount  of  my  receipts     . 
"  "      payments  . 

"       remaining  on  hand 
Amount  of  other  men's  notes  received 
"  "  "  disposed  of 

"       remaining  on  hand 
Amount  of  my  own  notes  issued 
"  "  "         redeemed 

"       remaining  to  be  paid 
1  am  accountable  to  them 
They  are  accountable  to  me 

I  owe  them      .         .         . 
Is  accountable  to  me 
On  hand  valued  at  . 

My  original  Capital  was 
"   Net  gain  is 

"  Present  Worth  is 


25,280 
13,575 


12,500 
7,500 


7,000 
2,000 


3,500 
3,000 


18,000 
5,205 


Resources.     Liabilities. 


11,705 

5.000 

5,000 

1,000 
4,000 
7,000 

500 

23,205 

$28,705 

$28,705 

Secondary  Accounts. 


Merchandise. 
u 

Amount  of  returns  or  sales 
"            anticipated  returns 

Total  returns 
Cost 

Ship  Jane. 

Profit  on  Merchandise 
Amount  of  returns   . 

"           anticipated  returns 

Total  returns 
Cost 

Charges. 

Profit  on  Ship 
Outlay    .... 
Returns  .... 

Interest. 
Profit  Sf  Loss. 

Loss 
Returns  .... 
Outlay   .... 

Gain     . 
Miscellaneous  items 

Total  Gains 
"     Losses 

Net  Gain 

.     10,630 
4,000 

Losses. 

1,335 
5,205 

Gains. 

.     14,630 
.     10,840 

1,640 
.       7,000 

3,790 

8,640 
7,850 

1,835 
500 

790 

.       2,500 
976 

.       6,540 
.       1,335 

1,524 
436 

. 

$6,540 

$6,540 

35 


SEC.  DL— ANALYSIS. 

In  the  following  exercises  the  student  must  distinguish  Primary  Accounts  from  Secondary. 
The  Primary  Accounts  are  Cash,  Bills  Receivable,  Bills  Payable,  and  Personal  Accounts  ; 
all  others  are  Secondary. 


Debits. 
25,800 
88,250 

7. r.ini 

7,630 
25,000 

5,180 
3-.  (inn 

3,963 

327 

17,530 

5,850 
8,000 


$183,030 


EXERCISE  II. 


Value  of  Property 
Unsold. 


Cash 
Merchandise 

Williat!)   Van  Allen   . 

Shipment  to  London 

Bills  Payable    . 

Cotton 

Bills  Receivable 

Charges  . 

Profit  &  Loss  . 

Ship  Re*   r 

Stock 

Thomas  F.  Clarkson 

David  Clarkson 

Required  the  Analysis. 


11,357 


l-.llllll 


Credits. 
12,500 
82,485 

3,847 
'  548 

3-2,nnn 

6,234 

24,000 
1,436 

3,840 
44,270 

9,875 

5,000 

$183,03n 


EXLT1CISE  III. 


14,840 

Bills  Receivable 

. 

4,000 

7,800 

Shipment  to  Cadiz     . 

. 

6,840 

John  B.  Dash   . 

. 

4,860 

6,000 

Ship  Ann 

7,500 

2,000 

24,975 

Cash         . 

. 

9,000 

5,000 

Cotton 

.         . 

4,000 

Francis  Van  Rensselaer 

.         .         • 

1,000 

14,000 

Merchandise 

3,357 

17,000 

4,000 

Bills  Payable   . 

>         .         • 

12,500 

Stock 

•          •         • 

11,500 

25 

Profit  &  Loss   . 

•         .         . 

William  M.  Vail       . 

•         •         • 

4,000 

$76,640 

$76,640 

EXERCISE  IV. 

6,000 

Jno.  Wiley       . 

•         .         • 

5,000 

10,000 

Merchandise 

3,970 

13,250 

10,000 

Bills  Receivable 

. 

6,000 

7,800 

Ship  Sarah 

7,500 

1,850 

3,000 

Samuel  Randal 

•         •         • 

2,210 

8,000 

Shipment  to  Canton  . 

. 

8,685 

14,500 

Cash 

•         •         . 

12, 

•l-n 

Profit  &  Loss  . 

.         .         • 

840 

3,000 

Bills  Payable    . 

.         . 

8,645 

4,000 

Etobt  D.  Weeks 

.         .         • 

1,000 

Stock 

12,800 

$66,780 

$66,780 

86 


SEC.  II.-ANALYSIS. 


Debits. 
11,200 
15,000 
50,800 
14,000 
7,885 
12,000 
600 

80 
1,950 
9,800 
1,000 
1,600 
1,800 


$127,715 


EXERCISE  V. 

Value  of  Property 

Unsold. 

Credits 

Bills  Payable    . 

. 

15,000 

Merchandise 

3,000 

14,980 

Casn 

,          . 

29,800 

Evert  D.  Long 

. 

10,000 

Ship  Star 

7,000 

1,735 

Bills  Receivable 

. 

8,000 

Charges   . 

. 

Stock        .... 

. 

26,000 

Profit  &  Loss   . 

. 

James  Levy     . 

. 

2,100 

Shipment  to  Canton  . 

. 

14,500 

Bininger  &  Cozens   . 

. 

2,000 

Shipment  to  Baltimore 

. 

1,200 

Coman,  Hopkins  &  Co. 

• 

2,400 

Required  the  Analysis. 


$127,715 


EXERCISE  VI. 

« 

Stock 

% 

32,200 

80,840 

Cash 

. 

45,000 

•  45,890 

Merchandise 

21,500 

34,230 

16,485 

Bills  Payable    . 

. 

60,985 

10,700 

Ship  Sirius 

10,000 

3,600 

2,800. 

Marshall  Lefferts 

. 

3,750 

14,000 

Tallow     . 

. 

12,030 

20,390 

Bills  Receivable 

. 

10,800 

12,000 

Real  Estate 

13,000 

4,000 

2,300 

Chas.  F.  Stagg 

. 

1,500 

Interest    . 

. 

3,700 

Effingham  Lawrence 

.         . 

2,900 

11,000 

Shipment  to  Havre    . 

. 

14,750 

4,550 

Henry  Long     . 

. 

5,900 

890 

Charges  . 

.         . 

5,800 

Austens  &  Spicer 

.         . 

'.           6,500 

7,600 

John  Van  Bergen 

. 

3,800 

$240,445 

Remn'rfid  thp  Analvsi«s. 

$240,445 

37 


148.69 

11.-46.66 

62,197.90 

7,846.84 

4,795.33 

17,451.90 

889 
5,911.:»!) 
9,076.97 

768.04 

26,889.86 
2,1  14.80 
1,864.88 
1,749.01 

B,( .00 

39,8(111.(10 

5,811.(17 

UK). 00 

5,187.24 

-12.83 


SEC.   II.-ANALYSIS. 


EXERCISE  VII. 


Debits. 

Value  of  rropertx 
unsold. 

1           Credits. 

49.000 

Cash 

. 

85,1  13 

18,190 

Merchandise 

6,000 

11. -.in 

.  !i  Ilutcliinson 

8,700 

:...-.oo 

Real  Estate 

- 

16,1 

Bills  Receivable 

B,020 

l.:iS5 

Shipment  to  London 

. 

1.-7.'. 

William  Hoeber 

. 

1,850 

6,742 

Shipment  to  Cadiz 

......00 

9,856 

Alfred  Seton 

. 

11,000 

Cotton 

l(t.7:<0 

3,000 

Bills  Payable     . 

15,000 

Stock 

. 

24,470 

4,800 

David  C.  Ilalsted 

11,000 

Ship  Helen 

10,000 

1,987 

104 

Interest     . 

650 

Charges    . 

. 

200 

Profit  &  Loss     . 

.             . 

5,304 

Shipment  to  Dublin 

*■ 

5,890 

8137,725 

81 37.7  25 

Required  the  Analysis. 


EXERCISE   VIII. 

Cornell  Brothers 

Shipment  to  Havre    . 

Cash 

Hops 

John  N.  Brinkerhoff 

Bank  Stock  2,000 

Interest    . 

William  Adrain 

Bills  Payable  . 

Stock 

A.  W.  Spies  &  Co.  . 

Merchandise  11,947.50 

Charges  . 

Tallow    . 

Halsted  &  Dash 

Real  Estate 

I  .ills  Receivable 

Shipment  to  Charleston 

Profit  &  Loss  . 

Sugar 


1,000 
(lost) 


3,99.-.. OS 
15,381.12 
48,350.86 

10.-J-J6.80 

3,000.00 

6,728.56 

500.00 

CMOS. 19 

23,941.70 

40,000.(10 
2,548.30 

18,785.36 

297.80 

6,655.11 

1,905.64 

.-..ooo.oo 

20,860.00 


7,167.97 
.12.83 


Required  the  Anal 


38 


SEC.  II -ANALYSIS. 

EXAMINATION. 

The  student  should  on  no  account  proceed  to  Section  III.  until  he  can  answer  satisfactorily 
and  promptly  the  following  questions  : — 

What  do  the  Debits  of  Cash  Account  show  7 — the  Credits  7 
What  are  called  Bills  Receivable  7     What  are  called  Bills  Payable  7 

Wh:it  do  the  Debits  of  Bills  Receivable  Account  show  ? — the  Credits  1 — the  face  of  the  Notes,  or  the  money  produced  7 
Whit  do  the  Debits  of  Bills  Payable  Account  show  ?— the  Credits  7— the  face  of  the  Notes,  or  the  money  1 
Whnt  do  the  Debits  of  a  Personal  Account  show  7 — the  Credits  7 
What  does  the  Balance  of  Cash  Account  show  7 
What  does  the  Balance  of  Bills  Receivable  Account  show  7     Why  7 
What  does  the  Balance  of  Bills  Payable  Account  show  7    Why  7 
What  does  the  Balance  of  a  Personal  Account  show  7 
What  accounts  are  called  Primary  Accounts  ? 
Why  are  they  called  Primary  Accounts  1 
Wherein  do  Primary  Accounts  differ  from  Secondary  7 
Which  are  Secondary  Accounts  7 
What  does  the  Credit  side  of  Stock  Account  show  ? 

What  does  the  Debit  side  of  Merchandise  Account  show  7 — the  Credits  7    How  do  you  find  the  value  of  Merchandise  unsold  7 
Is  not  the  value  of  Merchandise  unsold  put  down  as  Resources  7     Why,  then,  is  not  Merchandise  a  Primary  Account  7 

Annoer. — The  value  of  goods  on  hand  is  not  shown  by  the  Account  of  Merchandise,  but  by  an  inventory  taken  of  the  goods. 

What,  then,  is  the  use  of.  the  Merchandise  Account,  since  it  does  not  show  the  goods  unsold  7 

How  do  you  find  the  Profit  or  Loss  on  Merchandise. 

What  is  meant  by  Charges  Account  7     How  is  it  arranged  7 

How  can  Charges  make  returns  7     What  does  the  Balance  of  this  account  show  7 

What  does  the  Credit  side  of  Profit  &  Loss  Account  show  7— the  Debit  side  7    What  does  the  Balance  show  7 

What  does  the  Credit  side  of  Stock  Account  show  7 

What  do  you  add  to  the  Capital  to  find  your  present  worth  7 

Is  there  any  other  way  of  finding  your  present  worth  7 

Do  the  Primary  Accounts  show  all  your  Resources  7 

What  more  information  is  wanted  7 

Are  the  valuations  necessary  to  find  your  Gains  or  Losses  7    What  are  the  valuations  called  in  finding  your  Gains  or  Losses  7 


39 


SECTION    III. 

COMPILATION. 

The  student  who  has  mastered  the  preceding  section  has  now  surmounted  the  greatest 
apparent  difficulty  presented  in  accounts  ;  he  is  in  possession  of  a  general  plan  of  arm  him-. 
in*  -lit.  which,  if  carried  out,  must  lead  to  the  desired  point;  viz.  a  clear  view  of  the  position 
of  the  business  transacted.  He  has,  in  fact,  a  well  defined  theory  of  operations,  and  it  only 
remains  to  be  considered  what  difficulties  will  present  themselves  in  applying  this  theory  to 
the  daily  routine  in  detail. 

Receiving  cash,  paying  cash,  buying  merchandise,  and  selling  merchandise,  in  most  cases, 
form  nine-tenths  of  the  business  transacted.  Let  us  then  take  these  in  succession,  and  see 
how  our  theory  could  be  carried  out : — 

1st.  Suppose  we  make  it  a  rule  to  record  all  transactions  of  receiving  cash  in  one 
book  (see  Cash  Book);  it  will  then  be  very  easy  to  dispose  of  these  transactions  in  the 
Ledger,  for  we  may  add  together  all  cash  received  daily  or  monthly,  and  enter  (post)  the 
amount  on  the  Debit  side  of  the  Ledger  Account  of  Cash  ;  and  at  the  same  time,  and  from 
the  same  source,  we  post  each  sum  in  detail  to  the  credit  of  some  other  account.  For 
example  :  the  first  item  received  is  from  John  Wilson,  on  account,  and  consequently  we  must 
post  the  amount  to  the  Credit  side  of  Wilson's  account,  to  show  that  we  are  accountable  to 
him  ;  the  next  sum  received  is  for  merchandise  sold,  and  we  post  the  amount  to  the  Credit 
side  of  Merchandise  account ;  the  next  is  received  for  a  note  we  disposed  of,  and  we  post 
it  to  the  credit  of  Bills  Receivable  account ;  from  which  it  is  evident  that  every  sum  con- 
stituting those  receipts  must  become  a  credit  item  of  some  Ledger  account,  and  the  aggri 
being  entered  on  the  Debit  side  of  Cash  account,  the  debit  item  posted  for  these  transactions 
to  the  Ledger  will  be  the  same  in  amount  as  the  aggregate  of  the  credit  matter. 

2d.  The  transactions  of  paying  cash  are  all  to  be  posted  to  the  Debit  side  of  their 
respective  Ledger  accounts ;  for  when  we  pay  for  charges,  the  Charges  account  must  show 
on  the  Debit  side  our  outlay  ;  if  we  pay  for  merchandise,  the  Debit  side  of  that  account  must 
show  its  cost ;  if  we  pay  for  our  note,  the  Debit  side  of  Bills  Payable  account  must  show  the 
note  redeemed  ;  and  so  the  aggregate  of  the  debit  postings  will  in  amount  be  the  same  as  the 
total  payments  posted  to  the  Credit  side  of  Cash.  So  far  then  the  recording  of  cash  transac- 
tions and  posting  them  to  the  Ledger,  in  conformity  to  our  theory,  seems  to  offer  no  difficulty. 

Sd.  The  merchandise  bought  being  all  entered  on  the  Invoice  Book,  we  post  each  separate 
purchase  to  the  Credit  side  of  the  person's  account  of  whom  we  bought  it,  if  on  credit  ;  but 
if  on  our  note,  we  put  it  to  the  Credit  side  of  the  Bills  Payable  account,  which  is  to  Bhow 
what  notes  we  issued;  and  the  total  amount  purchased  we  post  to  the  Debit  side  of  Merchan- 
dise account,  which,  according  to  our  theory,  must  show   its  cost. 

4th.  Merchandise  sold  being  all  entered  on  the  Sales  Hook,  we  post  each  separate  sale  to 

the  debit  of  the  party's  account  who  owes  for  it  ;  or  if  we  took  notes,  to  the   I  ><  1>it  of  Bills 

Receivable  account;    and  the  aggregate  sabs,  to  the  credit  of  Merchandise  acoount     Now 

there  remain  to  be  considered  only  the  few  transactions  that  are  not  included  in  the  above 

1 1 pie  : — 

If  we  found  that  there  was  interesl  due  on  John  Brown's  account,  we  could  not  make  the 
entry  on  any  of  the  above-named  books  ;  we  should  therefore  enter  it  on  the  Day  Book,  and 
post  the  amount  to  the  Debit  side  of  John  Brown's  account,  and  Credit  of  Interest  account 
Or,  il  John  Brown  gave  us  bis  note  v,  pay  his  account,  we  must,  for  the  same  reason,  cuter  it 
on  the  Day  Book,  and  put  it  to  the  Debil  of  Bills  Receivable,  and  Credit  of  John  Brown. 
But  if  he  gave  us  his  note  for  goods  that  had  not  been  debited  to  his  account,  then  we  could 
enter  the  note  ,,n  the  Bales  Hook  (see  s.  |{.  12th  January) ;  in  whid,  case  John  Brown 
would  neither  be  debited  with  the  goods,  nor  oredited  with  the  note,  from  this  it  will  appear 
that  every  transaction  entered  on  the  Day  Book  oauses  two  i><>Mhi"s  to  the  Ledcer:  but  it  is 
4H 


OPENING  BOOKS. 

not  so  with  the  other  books.  In  the  receipts  of  cash  for  the  first  month  we  have  to  post  only 
one  debit  item  for  five  credit  items,  because  the  whole  five  receipts  are  posted  in  one  sum  ; 
whereas  had  we  entered  all  these  transactions  on  the  Day  Book  every  sum  must  have  been 
posted  twice,  making  five  entries  of  cash  where  one  would  suffice.  It  is  now  a  very  general 
practice  to  post  from  the  books  named,  without  making  any  Journal,  and  it  must.be  evident 
that  an  acquaintance  with  the  accounts  in  the  Ledger  is  all  that  is  required  to  enable  the 
learner  to  perform  this  duty  with  facility.  We  have  not,  however,  introduced  this  mode  of 
keeping  books  for  the  purpose  of  recommending  it  to  universal  practice  ;  we  have  chosen 
it  only  as  the  best  method  of  initiating  the  learner.  The  Journal  will  be  introduced  here- 
after, in  connexion  with  such  business  as  requires  its  use. 


EXERCISE  I.     (January.)    • 

Posting  from   Sales  Book,  Invoice  Book,  Cash  Book,  and  Day  Book,  without 

using  a  Journal. 

The  state  of  my  affairs  this  day,  January  1st,  1848,  is  as  follows  : — I  have  in  cash 
$5,857.13;  I  have  in  other  men's  notes  $3,^27.33;  I  owe  on  my  own  notes  outstanding 
$5,843.24  ;  John  Wilson  owes  me  on  account  $1,875.80  ;  I  owe  William  Brown  on  account 
81,575.23  ;  my  merchandise  on  hand  is  valued  at  $3,500  ;  I  have  bank  stock  worth  $7,000. 
Required  a  proper  disposal  of  the  above  in  Ledger  accounts.  (See  blank  Ledger  at  the  end 
of  this  Section.)     The  Ledger  accounts  will  now  stand  thus  : — 

Debits  Credits. 

5,857.13  Cash 

3,827.36  Bills  Receivable. 

Bills  Payable  5,843.24 

1,875.80  John  Wilson. 

William  Brown  1,575.23 

3,500.00  Merchandise. 

7,000.00  Bank  Stock. 

Stock  14,641.82 


$22,060.29  $22,060.29 


The  Capital  commencing  is  found  by  deducting  Liabilities  from  Resources. 

The  above  obviously  represents  the  state  of  the  whole  business  at  present,  and  therefore 
the  task  before  us  is  simply  to  note  the  changes  produced  by  each  transaction  on  each 
separate  account. 

The  balance  of  Cash  account  will  continue  to  show  the  cash  on  hand,  if  we  keep 
recording  each  receipt  on  the  Debit  side,  and  each  payment  on  the  Credit  side. 

The  balance  of  Bills  Receivable  account  will  show  the  amount  of  notes  on  hand,  if  we 
record  all  notes  we  receive  from  this  time  on  the  Debit  side,  and  all  we  dispose  of  on  the 
Credit. 

The  balance  of  Bills  Payable  account  will  continue  to  show  the  amount  of  notes  out- 
standino-,  if  we  record  all  issued  in  future  on  the  Credit  side,  and  all  redeemed  on  the  Debit. 

The  balance  of  Personal  accounts  will  be  kept  correct  if  we  debit  them  when  they  become 
accountable  to  us,  and  credit  them  when  we  become  accountable  to  them. 

Thus  we  may  regard  each  account  as  a  pair  of  scales,  in  which  we  record  the  exact 
weight  we  keep  adding  to  the  one  or  the  other  side  ;  so  that  at  any  time  we  know  how  much 
must  be  added  to  the  lighter  side  to  make  it  balance. 

The  Merchandise  account  cannot  be  made  to  show  at  all  times  the  amount  of  merchandise 
on  hand,  but  if  we  keep  recording  on  the  Debit  side  the  amount  of  each  purchase,  and  on  the 
Credit  side  the  amount  of  each  sale,  we  can  always  estimate  our  profits  thereon  by  adding  to 
the  sales  or  credits  the  value  of  what  remains  unsold,  and  then  deducting  the  cost. 

The  Bank  Stock,  and  all  other  such  accounts  of  property  bought  and  sold,  are  subject  to 
the  same  principles. 

6  41 


K-*^ 


SEC.  III. -COMPILATION. 

The  Stock  account  will  remain  unaltered  until  the  end  of  the  period  of  busiii'<<.  when  ire 
shall  estimate  our  profits,  and  add  them  to  the  original  capital. 

The  entries  already  made  would  be  termed  in  Book-keeping  ph  rung  the  accounts  ;" 

the  process  that  follows,  viz.  conducting  them,  or  recording  the  continual  changes  in  the  state 
of  each,  has  a  remarkable  feature,  which  cannot  too  soon  be  U'.ticd  and  impressed  upon  the 
mind,  viz.  that  there  can   be  no  transaction   which  does  ii'>t  disturb  at  least  two  ace 
and  whatever  we  enter  to  the  Debit  e.f  one  account  must  also  be  entered  to  the  Credit  ol 
one  or  more  other  accounts;    in    other    words,   every   transaction   supplies   to    the    i. 
accounts  as  much  debit  as  credit  matter,  it  is  doubly  entered.     For  example  :    merchandise 
is  sold  for  $3,000  ;  half  to  remain  on  account  with  John   Doe,  and   half  f>r  a  note.     It  is 
obvious  that  we  must  pul  $3,000  to  the  Credit  side  of  Merchandise   account,  $1,500  on  the 
Debit  side  of  John  Doe's  account,  and  $1,500  on  the  Debit  side  of  Bills  Receivable  account — 
the  two  debit  entries  being  equal  to  the  one  credit.     Let   the  student  go  on  to  imagine  any 
number  of  transactions,  and  he  will  find  this  rule  hold  good  j  in  fact,  it  can  be  theoretically 
demonstrated,  thus — the  whole  returns  of  the  business  must  appear  on  the  Credit  side  of  the 

lary  Accounts,  and  these  returns  being  necessarily  either  cash,  notes,  or  pt  r 
indebtedness,  become  debits  of  the  Primary  Accounts  ;  and,  on  the  other  hand,  all  outlay  in 
the  business  must  appear  on  the  Debit  side  of  the  Secondary  Accounts,  and  this  outlay  being 
jsarily  either  cash  paid,  notes  given,  or  debts  contracted,  becomes  credit  matter  for  the 
Primary  Accounts.  Hence  at  the  opening  of  the  accounts  the  debits  on  the  Ledger  equal 
the  credits,  and  as  equal  debits  and  credits  are  supplied  by  each  successive  transaction  we 
add  equals  to  equals,  and.  consequently,  the  whole  debit  matter  on  the  Ledger  must  at  all 
times  equal  the  whole  credit  matter  ;  if  it  do  not  it  is  certainly  erroneous.  Hence  the  utility 
of  taking  a  Trial  Balance,  which  is  commonly  done  every  month,  t<>  test  the  accuracy  of  the 
Ledger.    The  exercises  given  for  analysis  in  the  preceding  section  are  all  ;-  Trial  Balarj 

CONTINUATION  OP  EXERCISE  I. 

The  student  is  required  to  post  the  entries  of  the  month  of  January  into  the  prop  r  1. 
accounts  (see  blank  Ledger),  and  .show  a  Trial  Balance. 

Transactions  from  Day  Book. 
I  find  the  following  transactions  recorded  on  my  Day  I!  ok  during  the  month  : 

1.  1  have  .riven  my  note  to  Win.  Brown,  payable  in"  thirty  days,  tin-  noOU. 

2.  1  have  received  John  Wilson's  note  at  two  months  for  $300. 

3.  I  charge  John  Wilson  for  cartage,  labour,  and  postage 

JANUARY  81st. 
Transactions  from  Cash  Bot 
On  reference  to  my  Cash  Book,  I  find  I  have  received  cash  during  the  month  as  f.ll  >ws, 
viz.  from  John  Wilson  on  account,  $350 ;  for  merchandise  Bold,  $1,450]  for  notes  that  have 
become  due,  $2,500.  Total  ca  h  received,  $4,700.  I  have  paid  cash  during  the  same 
period  as  follows,  viz.  for  fuel,  $54;  can  -  1.43;  labour,  $25.18 ;  for  merchandise 
bought,  $2,573.24  j  for  my  own  notes  become  du  ,20.     Total  payment      -         >.05. 

Transactions  from  Invoice  Book. 
On  reference  t"  my  Invoice  Book,  I  find  I  have  purchased  during  the  month  merchandise 
as  follows,  viz.   from  Wm.  Brown  on  book  account,  $1,560.24;  From  Bundrj  persons,  for 
which  I  gave  my  a  i  324.32.     Total  purch  I  384.58. 

Transactions  from  Sales  Book. 
On   reference  to  my  Sales  Book,  I  find  thai  I  have  sold  merchandise  during  the  month  as 

follows,  viz.  to  John  Wil account,  $587.50  ;  to  Bundr)  pen  »ns,  for  which  1  have  taken 

their  notes,  $0,078.24.     1  ,.1  i. 

12 


BUSINESS   TRANSACTIONS. 

EXERCISE   II.— February. 

The  student  is  required  to  post  the  following  month's  transactions  into  the  Ledger 
Accounts,  and  show  a  Trial  Balance. 

Transactions  from  Cash  Book. 

I  have  received  from  John  Wilson,  on  account,  $800.  For  Merchandise  Cash  Sales, 
81,350.  For  Interest  on  Notes  discounted,  $30.  For  dividend  on  Bank  Stock,  $125.  For 
Notes  that  I  have  disposed  of,  $2,570.     Total  Cash  received,  $4,875. 

My  payments  of  Cash  this  month  have  been  as  follows  : — Paid  for  Merchandise,  $1,500. 
For  other  men's  Notes  which  I  discounted,  $3,000.  For  discount  on  uncurrent  money, 
$3.50.  For  Rent  of  these  premises,  $500.  For  Stationer's  bill,  $136.  For  loss  on  broken 
bank  notes,  $25.  For  Carpenter's  bill,  $32.78.  For  Cartage,  $25.30.  For  Labour,  $50. 
For  my  own  Notes  become  due,  $5,354.     Total  Cash  paid,  $10,626.58. 

Transactions  from  Invoice  Book. 

I  have  purchased  this  month,  from  sundry  persons,  goods  for  which  I  gave  my  Notes, 
$6,124.57  ;  and  from  John  Wilson,  on  Book  Account,  $1,325.32.  Total  purchased, 
$7,449.89. 

Transactions  from  Sales  Book. 

I  have  sold  goods  to  sundry  persons,  for  which  I  have  received  their  Notes,  $7,340.22  ; 
and  to  Wm.  Brown,  on  Book  Account,  $4,150.24.     Total  sold,  $11,490.46. 

Transactions  from  Bay  Book. 

Received  from  Wm.  Brown  his  acceptance  of  our  draft  for  this  amount,  $1,531.55. 
Accepted  John  Wilson's  draft  on  me  for  this  amount,  $791.09.  John  Wilson's  account  is 
chargeable  with  the  following — Cartage,  $5.20  ;  Labour,  $3.50  ;  Cooperage,  $4.23.  Total, 
$12.93.  William  Brown's  account  is  chargeable  with  Labour,  $15.20  ;  Postages,  $1.58. 
Total,  $16.78. 


EXERCISE   III.— March. 
Post  the  following  transactions,  and  show  a  Trial  Balance. 

Transactions  from  Cash  Book. 

I  have  received  Cash  this  month  as  follows :  For  other  men's  Notes  due,  $3,845.20.  For 
the  same  discounted,  $5,354.  For  Merchandise  sold,  $2,153.28.  From  S.  M.  Richardson, 
on  account,  $1,350.     Total  received,  $12,702.48. 

I  have  paid  Cash  this  month  as  follows,  viz. — For  my  own  Notes  due,  $7,583.  For 
Clerk's  salaries,  $300.  For  Merchandise  bought,  $584.  For  duties  on  Merchandise,  $53. 
For  Insurance,  $135.  For  Labour,  $29.35.  For  Cartage,  $15.27.  To  G.  L.  Morgan,  on 
account,  $1,253.24.  Bill  for  Desks  and  Fixtures,  $530.28.  Protest  on  Note,  $1.75. 
Discount  on  Notes,  $23.54.     Total  Cash  paid,  $10,508.43. 

Transactions  from  Invoice  Book. 

I  find  on  my  Invoice  Book  the  following  entries  of  Merchandise  purchased,  viz. — Bought 
of  sundry  persons  on  my  own  Notes,  $4,230.  From  Haggerty,  Draper  &  Jones,  who 
received  sundry  other  men's  Notes  in  payment,  amounting,  after  deducting  discount,  to 
$3,379.80.      From  G.  L.  Morgan,  on  account,  $3,534.20.     Total  purchased,  $11,144.00. 

43 


SEC.  IIL-COMPILATION. 

Transactions  from  Sales  B 

S     IS.  M.  Richardson,  on  aocoo  nindry  persons  on  their  '  \-:<k 

Total  Sales,  $10,380. 

Transactions  from  I><n/  ]h><>!;. 

Received  S.  M.  Richardson's  Note  for  $1,500.     Allowed   discount  on   Bills  Receivable 

_■  rty,  Draper  &  .lours,  for  Merchandise  bought  at  auction,  #52.40.     Gave  my 

note  to  <!.   I-.   Morgan   for  $1,800.     Allowed   S.   M.   Richardson   an   abatement  on   goods 

damaged,  $6.24.     Compromised  with  Wm.  Brown  for  his  note  now  due,  and  protested  for 

non-payment,  by  which  I  lost  $574.33. 

Explanations. 

In  the  entry  "n  Invoice  Booh  S3  imonnl  Haggerty,  Draper  A  Jonea  lake  the  nut. n  (or,  m>:  the  (tall  Ihce  at  them. 

Bill*  Receivable  will  be  credited  also  with  952.40  Br the  entry  on  the  Day  Book,  which,  added  lo$3J19J80,  makes  the  lull 

amonnl  of  1 1 1«*  notes  •  t « tposed  of 

In  the  compr Ise  with  William  Brown  the  Cash  pirt  i<  already  entered  In  the  Cash  transactions,  consequently  we  have 

only  to  debit  Profit  ft  Norn  and  credit  Bills  H ivable  with  $574  33.    It  will  I (nerved  we  entered 

ii>r  Notes  due  ;  this  Included  ..'iT-j  i.  ceived  on  Brown's  note,  which  was  l^r  §1531^5. 


EXERCISE   IV. 

The  Merchandise  on  hand  is  this  day  valued  ai  -:  1,729.50.  Bank  Stock  at  present 
quotations,  $7,231.75.     Required  a  statement  of  Resources,  Liabilities,  Profits,  Losses,  &c. 

Balancing  the  Accounts. 

At  the  end  of  the  year,  or  as  often  as  it  is  customary  to  balance  the  books  of  a  business, 
all  the  secondary  accounts  arc  balanced  ;  thus,  if  we  have  lost  by  an  account,  we  credit  that 
account  with  the  loss  which  balances  it.  ami  debit  Profit  &  Loss  account  the  same  amount, 
the  etl'eet  being  to  transfer  the  result  of  the  former  account  to  the  Profit  &  Loss  account. 
Fur  example  :  the  Charges  account  stands  thus — 

Charges. 

500 250 

250 

300 

Here  we  have  lost  by  Charges  $300,  and  to  balance  it  wc  credit  Charges  account  and 
debit  Profit  &  Loss  account  thus  : 

Cliarges. 

BOO 250 

250   ....         By  Profit  &  Loss         mhi 
800 


#1,0")0  si.o.-.d 

The  Profit  <5c  Loss  account  will  also  be  debited  thus: 

Profit  Sf  Loss, 
To  Charges,  $800, 

showing  whal  we  losl  by  charges.  Accounts  showing  a  gain  will  require  to  be  debited,  and 
Profit  a  Lo  i  oredited;  and  m  this  way  all  gains  and  losses  of  the  business  are  finally 
collected  in  tin-  Profit  iV  |,oss  account. 

In  oase  of  property  being  unsold,  however,  we  have  to  enter  its  value  on  the  Credit  aide  of 
the  account,  at  wi  11  a    the  profit  on  the  Debit,  to  make  it  balance  thus  : 
ii 


Outlay    . 

CI 

To  Profit  &  Loss 

3,000 
2,000 
1,000 
1,500 

BALANCING. 

Merchandise. 

By  New  Account  (unsold) 

Sales  4,000 
"      1,000 
"      2,500 

$7,500 

$7,500 

To  Old  Acct. 


$2,500 


The  amount  unsold  is  brought  down  to  begin  the  next  account  with,  but  if  all  is  sold  there 
is  nothing  to  carry  to  the  next  account. 

Finally,  when  all  gains  and  losses  are  brought  into  Profit  &  Loss  account,  that  account  is 
debited,  and  Stock  account  credited  for  the  net  gain,  which  entry  closes  or  balances  the 
Profit  &  Loss  and  all  the  Secondary  Accounts,  except  Stock,  which  account  will  then  stand 
thus  : 

Stock. 
Original  Capital  .  .  .  10,000 

Profit  &  Loss    ....  2,500 


$12,500 


We  therefore  write  on  the  Debit  side,  To  New  Account  $12,500,  making  it  balance,  and  on 
the  Credit  side,  underneath  the  footing,  By  Old  Account,  the  same  amount ;  which  is  the 
capital  for  the  succeeding  period. 

All  Primary  Accounts  are  balanced  to  or   by  New  accounts  for  their  balances,  but  Per- 
sonal accounts  should  never  be  balanced,  except  when  settlements  take  place. 


EXERCISE  V.     (Balancing.) 

Balance  all  accounts  except  Personal,  and  bring  down  the  balances,  as  exemplified, 
state  of  the  accounts  if  now  taken  off  will  be  thus: 


The 


Debits. 
Cash    . 

Bills  Receivable   . 
S.  M.  Richardson 
Merchandise 
Bank  Stock 


Credits. 


3,440.55 
12,821.64 
1,403.76 
6,729.50 
7,231.75 

&31, 627. 20 


Bills  Payable 
G.  L.  Morgan 
Stock    . 


11,302.02 

480.96 

19,844.22 


$31,627.20 


This  is  precisely  the  position  in  which  we  should  place  them  if  we  now  wished  to  com- 
mence a  new  set  of  books,  and  the  effect  of  balancing  has  been  to  bring  all  the  profits  into 
the  Stock  account,  and  keeg  all  the  others  showing  the  different  Resources  and  Liabilities. 
(See  Opening.) 

Note.  The  form  of  balancing  is  most  easily  acquired  from  the  board,  but  where  that  is 
not  used  the  teacher  will  supply  its  place  by  exhibiting  the  form  given  in  Teacher's  Part. 


45 


IPTS. 


SEC.  HI.— LEDGER  FORM. 

CASH.  Payments. 


Received. 


HILLS   IlLCLIYABLK. 


Disposed  of. 


iiy  New  Account  . 


EMED. 


RILLS   I'W  MILL. 


Issued. 


Dr. 


JOHN  WILSON. 


Ck. 


Dr. 


WILLIAM    r.UnWX. 


40 


Da. 

S.  M.  RICHARDSON. 

Cr. 

Dr. 

G.  L.  m«>u<;an. 

Cr. 

FOR  EXERCISES  I.,  II.,  III.,  IV.  &  V. 

STOCK.  Capital. 


Outlay. 


MERCHANDISE. 


Returns. 


Outlay. 


CHARGES. 


Returns. 


Outlay. 

INTEREST. 

Returns. 

Outlay. 

BANK  STOCK. 

Returns. 

Losses. 


PROFIT  &  LOSS. 


Profits. 


47 


SECTION    IV. 


JOURNALIZING. 

The  compilation  of  the  Journal  is  the  most  responsible  and  difficult  task  of  the  book-keeper. 
To  be  able  to  write  up  the  Journal  implies  not  only  a  thorough  knowledge  of  the  whole 
Ledger,  but  also  of  all  the  subsidiary  books  from  which  the  Journal   is   compiled.     The 

Journal  is  in  reality  neither  more  nor  less  than   a  book  of  directions,  stating   how   every 

transaction  is  to  be  disposed  of  in  the  Ledger;  that  is,  what  accounts,  ought  to  be  debited  and 
credited  in  each  case. 

The  first  entry  on  the  Journal  (see  Journal,  section  I.)  is  to  direct  what  accounts  ought  to 
be  debited* and  credited  at  the  outset  or  opening,  and  as  there  are  several  accounts  to  be 
debited,  the  aggregate  debit  matter  of  which  equals  the  aggregate  of  credit  matter  to  be 
passed  to  other  accounts,  the  entry  is  headed  "Sundries  to  Sundries,"  or  sundry  accounts  to 
sundry  accounts.  1st.  From  a  statement  of  Resources  and  Liabilities,  it  appears  there 
i-  Cash  00  hand,  which,  for  reasons  that  need  not  now  be  repeated,  is  set  down  as  a  debit,  to 
be  carried  to  Cash  account.  The  notes  on  hand  are  set  down  as  a  debit  to  Bills  Receivable 
account,  and  so  on  with  each  item  of  Resources  and  Liabilities  ;  and  when  on  completing 
the  entry  it  is  found  to  comprise  a  plurality  both  of  debits  and  credits,  it  is  headed  "  Sundries 
to  Sundries." 

The  nezl  transaction  is  that  we  have  given  our  note  to  William  Brown.  (See  section  III., 
Day  Book  for  January.) 

The  Journal  entry,  therefore,  directs  that  William  Brown's  account  shall  be  debited,  and 
Bills  Payable  account  credited,  which  is  written : 

William  Brown  ....  500,00 

To  Bills  Payable 500,00 

The  only  difficulty  that  can  now  present  itself  to  the  careful  student  is  the  form  and 
phraseology  of  the  Journal  entries;  what  accounts  ought  to  be  debited  and  credited  he  has 
already  determined  in  bis  exercises  in  compiling  the  Ledger. 

The  Journal  entries  then  assume  four  different  forms,  determined  by  the  number  of  debits 
and  credits  they  comprise.      For  example  : 

l.s7  Form. — A  transaction  or  entry  requiring  one  debil  and  one  credit. 

2d  Form. — A  transaction  or  entry  requiring  one  debit  and  a  plurality  of  credits. 

;W  Form.  —  A  transaction  or  entry  requiring  a  plurality  of  debits  and  one  credit. 

\lh  Form. — A  transaction  or  entry  requiring  a  plurality  of  debits  and  a  plurality  of 
cn  dits. 

The  first  business  before  making  the  Journal  entry  is  to  analyse  the  transaction;  that  is, 
to  determine  whal  accounts  should  be  debited  and  credited,  and  see  that  the  debit  matter 
equals  the  credit  matter.  Then  by  the  number  of  debits  or  credits  required  to  be  made,  the 
title  and  form  of  the  entry  is  seen  at  onoe.     For  an  example  of  the  first   form,  Bee  second 

entry  of  Journal,  viz. 

William  Brown, 

To  Bills  Payable. 

For  the  2d  form  Bee  "Cashto  Sundries;"  for  8d  see  "  Sundries  to  Cash  ;"  for  Ith  see 
"  Sundries  to  Sundries,"  at  the  beginning.  Observe,  that  the  oredil  entries  in  the  Journal 
have  always  the  word  "  To  "  prefixed  ;  but  the  debits  begin  without  an)  preposition.     It  is 

also  necessary  to  writ.,  the  names  of  Ledger  titles  on  the  Journal  in  a  larger  hand  than  the 

explanations  attached. 

■IN 


JOURNALIZING  THE  BALANCES. 

After  making  out  an  Analysis  or  Balance  Sheet  from  the  Ledger,  previous  to  balancing  the 
accounts,  it  is  necessary  to  make  journal  entries  of  all  the  Profits  &  Losses.  For. example, 
the  Balance  Sheet  shows  a  profit  on  merchandise  of  $7,324.05,  which  is  journalized  : 

Merchandise         .  .  .  .         7,324.05 

To  Profit  &  Loss    .  .  .         7,324.05 

Charges  account  shows  a  loss  of  $1,692.88,  and  is  journalized  : 

Profit  &  Loss        ....  1,692.88 

To  Charges    ....  1,692.88 

The  student,  as  an  exercise,  would  do  well  to  journalize  the  closing  entries  of  all  the 
exercises  in  Section  II. 

POSTING  FROM  THE  JOURNAL. 

Transferring  the  different  debits  and  credits  to  the  proper  accounts  in  the  Ledger  is  called 
Posting. 

The  operation  of  posting  will  be  best  explained  by  a  few  examples. 

The  first  entry  on  the  Journal  to  be  posted  is  Cash  debit  $5,857.13  ;  this  amount  is  there- 
fore entered  on  the  Ledger  in  the  Debit  column  of  Cash  account.  On  the  left  is  a  column 
for  the  date,  and  next  the  dollar  column  is  a  small  column  to  enter  the  journal  page,  and  in 
the  space  between  is  written  "  To  Sundries,"  indicating  that  there  are  several  credits  in  the 
same  journal  entry. 

The  folio  or  page  of  the  Cash  account  is  then  written  in  the  small  column  on  the  left  of  the 
Journal,  opposite  the  word  cash.  This  serves  to  show  that  the  item  is  posted,  and  what  page 
in  the  Ledger  it  appears  on. 

We  will  next  take  one  of  the  credits  of  the  same  entry,  viz.  "Bills  Payable."  We  turn 
to  the  account  headed  Bills  Payable,  and  enter  on  the  Credit  column  $5,843.24,  "  By 
Sundries,"  with  the  date  and  journal  page,  then  the  Ledger  page  being  placed  on  the  journal, 
it  is  posted. 

All  other  items  of  this  entry  are  posted  in  the  same  way. 

But  in  the  next  entry,  when  we  debit  William  Brown's  account,  we  write  "  To  Bills 
Payable,"  because  there  is  only  one  balancing  credit;  and  in  crediting  Bills  Payable  we 
write  "  By  William  Brown,"  for  the  same  reason. 


EXAMINATION. 

If  I  would  make  an  entry  on  my  Journal  to  debit  Bills  Receivable  and  credit  Merchandise,  how  should  I  word  it  ? 

Answer. — Bills  Receivable  to  Merchandise. 

If  1  would  debit  Merchandise,  credit  John  Brown,  and  credit  James  Austen,  how  should  I  state  it? 

Answer. — Merchandise  to  Sundries. 

To  John  Brown, 
"  James  Austen. 
Is  there  any  equ  ility  necessary  between  the  Debit  and  Credits? 
Answer  — The  Debit  must  equal  in  amount  the  sum  of  the  two  Credits. 
Suppose  after  m  kins.'  a  Jour  1  a!  entry  you  hid  the  Debit  and  Credit  unequal,  what  is  your  conclusion  ? 

Answet That  there  is  an  error. 

ll  they  do  equal  does  it  prove  the  entry  correct  ? 

Answer. — No. 

Why  ? 

Answer. — The  wrong  accounts  may  be  debited  or  credited  without  affecting  their  amounts. 

If  we  would  debit  Michael  Snow  and  E.  .Nelson's  accounts,  and  credit  Merchandise  account,  how  should  we  word  the  entry? 

Answei Sundries  to  Merchandise. 

Michael  Snow, 

E  Nel-on. 
Which  form  of  entry  would  this  be  ? 
Answer. — Third  form. 
Why  ! 

Answer. — Because  it  has  a  plurality  of  debits,  and  only  one  credit. 

It  we  would  debit  several  accounts,'  and  credit  several  accounts,  how  should  we  head  the  entry  ? 
Answer.— Sundries  to  Sundries. 
^Jf"  Particular  transactions  proposed  to  a  class  in  journalizing  should  be  performed  on  the  black-board. 

7  49 


SEC.   IV.-JOlR\ AUZING. 
EXERCISE  I. 

Journalize  (he  January  transactions  of  the  preceding  section. 

EXERCISE  II. 

Posl  the  transactions  of  January,  and  take  a  Trial  Balance. 

Note.  In  heading  the  accounts  in  the  Ledger  the  teacher  will  direct  how  many  lines  each 
account  will  require. 

EXERCISE   III. 
Journalize  and  Post  the  transactions  of  February,  ami  take  a  Trial  Balance. 

EXERCISE  IV. 
Journalize  and  post  the  transactions  of  March,  and  take  a  Trial  Balance. 
Note.  In  taking  a  Trial  Balance  the  whole  of  the   previous  month   or   months   must   be 
included,  unless  the  account  has  been  balanced  and  ruled  off. 

EXERCISE  V. 

Make  out  the  Analysis  or  Balance  Sheet,  journalize  your   profits  and  losses,   and  balance 
all  accounts,  except  personal. 

EXERCISE  VI. 
In  this  exercise  the  transactions  are  given  in  the  order  of  dates,  each  to  be  separately 
journalized  ;  but  in  practice  the  journal  is  more  frequently  compiled  from  several  books,  viz. 
Invoice  Book,  Sales  Book,  Cash  Book,  and  Day  Book,  there  bein^  no  one  book  from  which 
the  Journal  could  be  compiled.  There  are  nevertheless  some  kinds  of  business  in  which  it 
answers  very  well  to  enter  briefly  every  transaction  on  the  Day  Book,  and  on  the  other  books 
before  mentioned  the  details  in  full  are  entered  in  addition  ;  but  this  makes  more  writing  in 
Day  Book,  Journal,  and  Ledger,  as  will  be  understood  from  subsequent  exercises.  The 
object  in  view  here,  however,  is  to  exercise  the  student  thoroughly  in  the  analysis  of  mixed 
and  complicated  transactions,  and  the  phraseology  peculiar  to  the  Journal.  It  must  also  be 
remarked,  that  these  are  strictly  exercises  for  the  pupil,  not  examples  of  business  entries  in 
any  book.  Transactions  are  related  here  in  such  manner  as  seemed  best  calculated  to 
insure  to  the  student  a  thorough  understanding  of  the  nature  of  the  business  transacted. 

EXERCISE  VI. 
James  Strong  has  put  into  my  hands  the  following  memoranda,  from  which   is  required  a 
Journal,  Ledger,  and  Trial  Balance  for  the  first  month.* 

.1  ANT  \!!Y    1st,    1848. 
I  commence  business  this  day  as  follows  : 

I  have  Cash  on  hand         ....  20,000 

"    "      Bills  Receivable  ....         1  1,000 
John  A.  ( runn  owes  me  ....  <><>() 


M>  Capita]  being    ....       834,600 


•id. 
Bought  of  L.  B.  Binsse  &  Co.  goods  as  per  Invoice  Book,  for  whioh  1  paid  In  cash  15,000. 

4th. 
Sold  Houghton  &  Arnold  on  book  account  sundry  goods,  as  per  Sales  Book,  >s :<.."< i k » . 


•  Where  recltntlon  of  thi  i  )onrnallgln|  It  to  be  mvle  il  the  bowd  In  lcI»m.  the  itadenl  thnuld  prepire  hlmtelf 

by  itndylng  cneh  tr  n  n«l)     nnd  we  no  objection  to  havlnf  the  i»ihh.i  entries  m4  on  •  tUle.    A   pflpll  may 

in. i  ii i »  i  \    do  linn  .  ii   ii  Lii  i  when  thi    iniwer  U  heatUjr  required 

50 


BUSLNESS    TRANSACTIONS. 

January  5th,  1848. 
Bought  one  third  of  the  ship  Europe,  for  which  I  paid  cash  $12,000. 

6th. 
Bought  of  Marsh  &  Compton  goods  as  per  Invoice  Book,  for  which  I  paid  in  cash  $4,000. 

7th. 
Bought  of  Houghton  &  Arnold  on  book  account  goods  as  per  Invoice  Book  $1,500. 

9th. 
Received  of  Houghton  &  Arnold  cash  on  account  $1,500. 

11th. 
Bought  of  Greenways,  Henry  &  Smith  goods  as  per  Invoice  Book,  for  which   I  gave  my 
note  payable  in  ninety  days  $300. 

12th. 
Sold  John  Wilmarth  for  cash  goods  as  per  I.  B.  $1,200. 

13th. 
Sold  Houghton  &  Arnold  on  book  account,  goods  as  per  I.  B.  $1,800. 
Received  of  Houghton  &  Arnold  cash  on  account  $2,000. 

14th. 
Sold  Ira  Perego  goods  as  per  I.  B.,  for  which  he  has  granted  me  his  acceptance,  payable 
in  sixty  days,  $4,800. 

17th. 
Received  in  cash  for  freight  of  ship  Europe  $2,500. 

19th. 
Bought  of  Houghton  &  Arnold  on  account  as  per  I.  B.  $10,600. 

20th. 
Accepted  Houghton  &  Arnold's  draft  on  me  at  ninety  days  for  this  amount  $5,000. 

22d. 
Bought  of  A.  W.  Spies  &  Co.  goods  as  per  I.  B.  $4,500,  for  which  I  gave  in  payment  my 
note  at  three  months  $3,000,  and  paid  the  balance  in  cash  $1,500. 

23d. 
Paid  for  repairs  of  the  ship  Europe  in  cash  $800. 

24th. 
The  North  River  Bank  has  discounted  for   me   Ira  Perego's  acceptance,  for  which  they 
gave  me  in  cash  $4,756.80,  keeping  back  for  the  discount  $43.20.     Amount  of  the  note 
$4,800. 

25th. 

Sold  Houghton  &  Arnold  a  quantity  of  merchandise  as  per  Sales  Book  $8,000,  for  which 
they  gave  me  in  part  payment  Austen  &  Spicer's  note  at  three  months  for  $5,000;  the  balance 
to  remain  on  account. 

28th. 

Shipped  per  Geo.  Washington  for  London,  and  consigned  to  Johnson  &  Co.,  to  be  sold  for 
my  account  a  quantity  of  merchandise  per  "  Invoice  Book  Outward  " 

amounting  to  .....  6,000 

Passed  my  Note  for  Insurance  .  .  .  100 

Paid  Shipping  Expenses  in  Cash         .         .  30 

$6,130 


Cash  drawn  for  my  Private  Expenses  .         .         .         600 

51 


=^ 


SEC.  IV.— JOURNALIZING. 

Jancaky  29th,  1849. 
Sold  Houghton  &  Arnold  goods   as  $  S.  B.  §2,900,  and    received   from   them  Ada; 
Co.'s  acceptance,  due  5th  April,  for  83,000,  on  which  they  allowed  me  a  discount  of  83.50, 
the  balance,  $00.50,  to  be  placed  to  their  credit. 

EXERCISE    VII. 

The  Merchandise  on  hand  this  day  is  valued  at  si. 500. 

The  Ship  Europe  is  valued  al  112,000. 

The  Shipment  to  London  is  valued  at  cost. 

The  student  is  required  to  exhibit  an  Analysis  or  Balance  sheet  of  the  business,  Journalize 
and  post  the  Profits  and  Losses,  balance  all  the  accounts  except  the  Personal,  and  bring  down 
the  balances  to  continue  the  business. 

EXERCISE  VIII. 
Journalize  and  post  the  following  month's  transactions,  and  show  a  trial  balance. 

February    1st. 
Sold  for  Cash  to  Peter  Hawes  goods  as  $  S.  B.  8*00. 

3d. 
Sold  John  A.  Gunn,  on  Book  account,  sundry  goods  as  ^  S.  B.  8680. 

6th. 
Bought  of  Marsh  &  Compton  sundry  goods  as  <{p  I.  B.,  for  which  I  gave  my  note  at  thirty 
days,  82,000. 

8th. 

Bought  of  Charles  F.  Stagg  20  lots  on  Third  Avenue,  for  819,000,  for  which  I  have  paid 
as  follows  : — 

Haggerty,  Draper  &  Jones's  note  for        .         .         .         5,000 
S.  T.  Jones  &  Co.'s  "  ...  6,000 

My  own  two  notes,  each  at  2  mos.,  84,000        .  .  8,000     819,000 

12th. 

Bought  of  Tracy,  Irwin  &  Co.  sundry  goods  as  ^  I.  B.,  for  which  I  gave  my  note, 
83,000. 

13th. 

Sold  Thomas  Carpenter  sundry  goods  as  *$  S.  B.,  for  which  I  received  his  note,  83,000. 

14th. 
Received  of  John  A.  Gunn  Cash  in  full,  81,280. 

16th. 
Sold  Houghton  &  Arnold,  on  account,  goods  as  ^  S.  B.  8780. 

17th. 
Bought  of  S.  T.  Jones  &.  Co.  a  quantity  of  Merchandise  as  ^  I.  B.,  for  which  I  gave  my 
note,  (8,000. 

18th. 
Sold   J.  Ramsay  goods   as   <$}   S.  1!.  81,000,    and    received    in    payment    his    note    at    thirty 

for -J,000 

Cash  for  the  balance 2,000     8,4000. 

20th. 
Shipped   '{>    Brig    Nancy  to   Haiti morr,  and   consigned   to  Adams  &  Co.  to   be   sold   on    my 
BCOOUBt,  a  quantity  <»f  Merchandise  as  |J  "  Invoice  Hook  <  Mit ward"     .  .  81.000 

The  expenses  thereon,  for  Insurance,  Cartage,  and  Labour,  amounted  to  .  00.00 

52 


BUSINESS   TRANSACTIONS. 

February  21st,  1848. 
Paid  sundry  Charges  as  ^  petty  Cash   .......       $180.00 

22d. 
I  have  discounted  the  following  notes  at  7  per  cent. — 

My  own  note  to  C.  F.  Stagg,  due  April  11th     .  .         4.000 
S.  T.  Jones  &  Co.'s  note,               "          1st        .  6,000 

Discount  on  $4,000  for  48  days         .         36.82  10,000 

"  6,000  "    38     "  .         43.72  80.54 

Paid  in  Cash.  .       "         T  .     -$9,919^46 

28th. 
Bought,  through  W.  &  J.  O'Brien,  20  shares  American   Exchange  Bank   Stock  at  $90 

f  share 1,800 

His  charge  for  Brokerage,  \  per  cent.  .....  4.50 

Paid  in  Cash     ....       $1,804.50 


Cash  drawn  for  private  expenses,  $250. 

EXERCISE    IX. 
Journalize  and  post  the  following  month's  transactions,  and  take  a  Trial  Balance. 

March  1st. 
Paid  taxes  on  lots  in  Third  avenue  in  Cash,  $375.00. 

3d. 
Sold  Henry  Long,  for  Cash,  Merchandise  as  $  S.  B.  $2,000. 

4th. 
Sold  Willet  McCord  goods  as  ^  S.  B.,  for  which  he  gave  me  his  acceptance,  $4,000,  at 
30  days,  due  6th  April. 

6th. 

Paid  sundry  Charges  $  petty  Cash,  $70.00. 

8th. 

Sold  John  Wilwarth  10  lots  on  Third  avenue  at  $1,350  $)  lot. 

Received  in  payment  my  note  to  Chas.  F.  Stagg       .  .  .  4,000 

On  which  I  am  allowed  33  days'  discount  @  6  per  cent.   .         .  22 

Received  John  Austin's  note  at  60  days  for 

"         Cash  for  the  balance         ..... 

10th. 
Bought  at  Auction  a  quantity  of  dry  goods  amounting  to  $4,500. 
For  which  I  gave  in  payment  J.  Ramsay's  note  of    . 
On  which  I  allowed  a  discount  of    . 

Gave  my  note  for  . 

Paid  the  balance  in  Cash         ...... 

11th. 
Paid  at  the  North  River  Bank  for  my  note  of  6th  Feb.,  due  this  day,  $2,000. 

53 


3,978 

6,000 
3,522 

$13,500 

2,000 
4.25 

1,995.75 
1,500.00 
1,004.25 

$4,500 

1 vMwm^""  'i  ujw*     . 


SEC.  IV.-JOURXAL1ZLNG. 

March  12th,  1848. 
I  have  discounted  Houghton  &  Arnold's  note  at  30  days  for  $650  at  6  per  cent.,  and  paid 
in  cash      .         .         .         .         .         .         .         .         .         .         646.45 

Discount        ......  3.55 


8050.00 


14th. 
Received  ^  Great  Western  from  James  Kelly,  London,  pursuant  to  my  order,  and  for  my 
account,   a  quantity  of  merchandise,  amounting  ^  invoice  to  JE416  10s.     3$,  at  8  per  cent. 

premium, 2,000 

Paid  Freight  and  Charges  in  Cash    .  .  200      $2,200 


10th. 
Thomas  Carpenter  having  failed  offers  25  per  cent,  on   his  note  of  $3,000,  on  condition 
that  I  relinquish  further  claim  ;  considering   it  the  only   alternative  of  a  total   loss  1  have 
acceded.     I  have  given  up  his  note,  and  received  in  cash        .  750 

My  loss  being 2,250      $3,000 


20th. 
Sold   Marsh   &  Compton  @   6  per  cent,  premium  my  draft  at  sight  on  Johnson  &  Co., 
London,  for  my  account  of  JE900  sterling. 

Amount  at  par  n  l.|  ll  p  £      .  .  .  4,000 

Premium  ....  240 


*I  therefore  credit  Johnson  &  Co $4,240 


Received  in  payment  my  note  in  favor  of  Tracey,  Irwin  &  Co.      3,000 
On  which  they  allowed  me  20  days'  discount     ...  13 


2,987 
Received  in  Cash    .....  1,253      $4,240 

22d. 
Paid  for  Insurance  on  ship  Europe    .....  $360 

23d. 
J.  Ramsay's  note  of  18th  February  due  this  day  has  been  protested. 

Amount  of  Note      .....  2,000 

Protest 1.75 


82,001.75 


I  have  received  his  new  endorsed  note  for  $2,011.75,  interest  included. 

23d. 
Sold  Henry  Long  for  cash  merchandise  as  per  S.  B.  $1,800. 

24th. 
Received    from    Adams  &  Co.,  Baltimore,  account  sales  of  shipment  39  Nancv,  the  net 
proceeds  being  $5,y47.H;i. 


*  A  d.  iii  tine  cootnu  b  .i  ■  hould  slwayi  ba  recorded  .a  arhal  h  will  owl  in  dm  u     Johnson  ehaigM  sir..m;  wall  a''mhi 
Blrong  must  beud  AlMAi  j  uud  if  il  .should  cost  more  or  lots  to  buy  .CiHW  ihuu  84,--'*0,  iho  dill'.'roiicu  Is  gain  or  loa3  to  Slrons.    ' 

54 


DETECTION  OF  ERRORS. 

26th. 
Paid  for  Rent  of  Store  (three  months) 
"      "    Clerks'  Salaries    .... 
"      "    Stationer's  Bill 127.33     $1,677.33 


750 
800 
127.33 

',847.33,  and 
5,818.10 
29.23 

28th. 
I  have  negotiated  my  draft  on  Adams  &  Co.,  Baltimore,  for 
Received  in  Cash    ..... 

Discount  .  .  .  29.23     $5,847.33 

31st. 
Cash  drawn  from  private  expense     .....  $700 

Made  up  Houghton  &  Arnold's  account  current,  and  find  there  is  due  them  for  Interest  to 
date  $67.50. 


DETECTION     OF     ERRORS. 

The  student  having  had  some  experience  in  taking  trial  balances,  will  now  appreciate  a 
few  hints  with  regard  to  the  detection  of  errors.  The  presumptuous  may  rely  for  awhile  on 
their  infallibility,  but  I  have  always  found  the  most  accurate  and  experienced  accountant 
among  those  who  have  the  least  to  say  of  their  infallibility,  and  who  are  most  impressed  with 
the  necessity  of  taking  every  step  to  check  and  corroborate,  or,  if  possible,  prove  their  work 
as  they  proceed. 

Let  it,  then,  be  understood  that  a  trial  balance  affords  no  proof  of  the  correctness  of  books; 
if  the  debits  and  credits  do  not  equal  there  is  certainly  error,  but  if  they  do  equal  there  is  no 
certainty  that  the  accounts  are  correct.  Charges  Account  may  be  debited  instead  of  John 
Doe's,  the  book-keeper,  and  still  the  accounts  would  be  balanced,  and  conceal  the  fact  that 
John  Doe  was  accountable. 

Before  taking  a  trial  balance,  every  entry  should  be  called  off  by  one  person  from  the 
Journal,  and  checked  on  the  Ledger  by  another.  All  debits  should  be  called  off  throughout 
the  books  first,  then  all  credits.  Many  may  rely  sufficiently  on  their  accuracy  to  obtain  a 
balance  without  this,  but  that  does  not  obviate  the  necessity,  as  will  appear  more  clearly  from 
the  following. — I  have  on  my  Ledger  two  accounts,  both  the  individuals  named  Smith — one 
is  named  Benj.  F.  Smith,  and  the  other  Benj.  T.  Smith.  My  trial  balances  had  come  out 
even  every  month  without  the  extra  labour  of  checking,  and  I  congratulated  myself  on  my 
accuracy,  on  the  faith  of  which  I  settled  accounts  with  B.  F.  Smith,  and  received  the  balance 
claimed.  Two  months  subsequently  B.  T.  Smith  called  to  settle,  and  at  once  pointed  out  an 
error  of  $3,000,  with  which  he  was  overcharged.  Reference  being  made  to  the  original 
entries,  the  matter  was  cleared  up.  B.  T.  Smith  was  charged  instead  of  B.  F.  Smith.  The 
T  on  a  hasty  glance  may  pass  for  an  F.  Now  B.  F.  had  easily  overlooked  an  omission 
of  $3,000  among  the  numerous  large  items  at  the  debit  of  his  account,  but  he  admits  the 
error,  and  is  willing  to  rectify  so  far  as  he  can.  He  therefore  notifies  me  that  he  is 
endeavouring  to  make  arrangements  with  his  creditors  for  a  discharge  from  his  liabilities  on 
payment  of  twenty-five  cents  on  the  dollar  !  This  loss  would  have  been  saved  by  checking. 
The  T  and  the  F  sound  entirely  different,  and  as  they  were  not  sufficiently  alike  to  be 
confounded  by  a  person  reading  off,  the  error  could  not  have  escaped  detection. 

It  frequently  happens  that,  even  after  checking  and  calling  off,  a  trial  balance  is  not 
obtained  ;  it  is  therefore  necessary  lo  fix  upon  some  part  of  the  process  where  it  may  have 
been  overlooked — 

1st. — Ascertain  the  amount  of  error,  or  the  difference  between  debits  and  credits.  Divide 
this  amount  by  9,  and  if  nothing  remains  check  all  your  accounts  over  again,  and  look 
particularly  for  some  amount  transposed  ;  that  is,  5,840  on  the  Journal  may  be  posted  5,480, 
or  787  made  778  :  errors  of  this  kind  often  escape  detection  several  times.     It  is,  therefore, 

55 


5TV? 


SEC.  IV. -COMMISSION  BUSINESS. 

useful  to  know  that  the  same  figures  written  in  any  different  order  of  succession  will  give  a 
difference  which  is  a  multiple  of  9,  for  example — 

5.784 
I  578 


9)1,206 
i:U 

2d. Look  through  the  Journal  fir  an  amount  corresponding  with  your  error. 

a,l. Look   for  an  amount  corresponding   with  half  the  error;  an  amount  may  be  twice 

i  or  omitted.'or  placed  to  the  wrong  Bide.  It'  twice  posted  or  omitted,  it  will  be  of  the 
amount  as  the  difference  on  your  trial  balance,  if  posted  to  the  wrong  Bide  it  will  be 
half  that  sum.  . 

4,1,. [fyour  Journal  is  arranged  with  Debit  ami  Credit  columns,  compare  the  total  debits 

and  credits,  with  the  footings  of  the  trial  balance;  if  not,  examine  all  extensions  on  the 
Journal,  entry  by  entry,  and  see  that  the  debits  and  credits  equal ;  and  last,  but  not  least, 
never  trust  your  addition  without  adding  both  up  and  down. 

Pupils  who  have  had  but  little  experience  in  adding  and  transcribing  amounts,  have 
generally  a  good  deal  of  trouble  in  obtaining  a  trial  balance,  and  an-  prone  to  lean  upon  the 
teacher  for  assistance,  under  the  impression  that  if  the  error  is  merely  an  oversight  they 
would  gain  time  and  save  trouble  by  having  their  work  corrected.  My  own  experience 
warrants  me  in  Baying  that  the  teacher  who  gives  way  to  this  argument  will  never  make 
accountants.  The"  search  tor  errors  drives  the  student  back  upon  the  investigation  of  his 
theory,  and  is  the  most  important  part  of  his  course.  He  has  never  accomplished  his  object 
until  he  has  obtained  a  complete  reliance  on  his  plan  of  operations  ;  any  inquiry  as  to  what 
may  have  produced  errors  will  afford  the  teacher  opportunity  of  giving  instruction  at  the  very 
time  when  it  will  be  appreciated  and  retained. 


COMMISSION    BUSINESS. 

A  large  amount  of  business  is  done  by  merchants  on  commission  ;  that  is.  the  owner 
consigns  his  goods  to  an  agent,  called  a  Commission  Merchant,  whose  duties  are  to  sell  such 
goods  to  the  best  advantage,  and  account  to  his  employer  (the  consignor)  for  the  proceeds*  he 
(the  consignee)  being  allowed  to  deduct  from  the  total  sales  all  necessary  expenses,  such  as 
Cartage,  labour,  freight,  &C,  together  with  a  certain  per  centage  on  the  gross  amount  ot 
.  called  his  commission.      For  example,  we  have  sold  goods  for  A., 

The  gross  sales  being      ........      5,845.80 

We  Charge  for  Labour     ........  15.00 

"  *         "    Cartage 18.50 

"         "         "    Postages 25 

"         "         "    our  Commission  r>  per  cent,  on  $5,845.50    .  .        202.20  826.04 

Net  proceeds  due  A $5,510.76 

This,  with  a  little  modification  in  firm,  is  the  document  called  an  "  Account  Sabs.*"  which 

it  is  the  ,1111V  of  the  consignee  to  render  to  tie-  owner  or  consignor  (sec  Account  S  lies),  after 
all  the  goods  are  sold.  It  is  necessarv,  therefore,  to  determine  how  busim  ss  ot  this  nature 
may  be  disp  ised  of  on  the  | ,, .  ■ 

1st.   W ii i.n  wk  ai:i:  Consignors. — [f  we  consign  Lri" »ls  1. 1  V.  to  sell  for  our  account,  we  of 
course  send  A.  an  invoice  of  1  Is;  but   it   must   be   borne   in  mind  that  they  are  not 

sold  to  A.,  and  therefore  \.  must  qo!  be  debited  ;  he  only  becomes  indebted   to  us  when  he 
lias  realized  from  the  Sabs.     We  therefore  debit  an  aooount  headed  "Consignment  t"  v .. 
56 


COMMISSION  BUSINESS. 


or,  if  sent  by  sea,  "Shipment  to  London,"  or  elsewhere;  and  when  we  receive  A.'s  Account 
sales  we  credit  said  consignment  or  shipment,  and  debit  A.  with  the  net  proceeds  in  his 
hands.  The  shipment  then  shows  what  it  cost  and  what  it  sold  for,  and  A.'s  account  shows 
that  he  owes  us  the  proceeds. 

2d.  When  we  are  Consignees. — If  A.  sends  us  an  invoice  of  goods  to  sell  for  his  account 
and  risk,  we  do  not  credit  his  account  with  the  amount  of  such  invoice,  for  the  very  obvious 
reason  that  we  have  not  bought  the  goods ;  we  have  not  contracted  any  debt,  nor  is  such 
invoice  in  any  way  concerned  with  any  Ledger  account ;  hence  we  make  no  Journal  entry  of 
the  invoice  price  of  goods  consigned  to  us.  We  simply  either  copy  the  invoice  into  a  book 
kept  especially  for  that  purpose,  or  into  our  general  Invoice  Book,  short-extended,  like  cash. 

We  must  provide,  however,  for  making  out  an  Account  Sales  when  all  are  sold,  or  when 
such  account  may  be  required  ;  and  to  do  this  nothing  more  is  necessary  than  to  open  an 
account  with  A.'s  sales,  or  A.'s  consignment,  and  when  we  sell  A.'s  goods  credit  his  Sales 
account  instead  of  crediting  Merchandise  account,  which  is  an  account  of  our  own  goods. 
By  this  process,  A.'s  Sales  account  always  shows  on  the  Credit  side  the  amount  of  his  goods 
sold,  the  Debit  being  blank,  except  when  the  practice  is  followed  of  charging  expenses  to  the 
Sales  account  at  the  time  such  expenses  are  paid  ;  but  it  is  much  more  general  and  more 
convenient  in  commission  houses  to  make  no  debit  to  a  Sales  account,  except  large  amounts 
of  duties,  freight,  &c,  until  the  Account  sales  is  prepared,  when  a  full  estimate  of  all  petty 
charges  is  made  at  once  ;  hence  in  paying  for  labour,  cartage,  or  insurance  on  A.'s  sales  the 
entry  would  be  Charges  or  Insurance  to  Cash,  as  though  they  were  paid  for  our  own 
business.  This  presents  no  difficulty  in  practice.  The  amounts  charged  the  owner  are  not 
necessarily  the  amounts  actually  paid  by  the  agent,  but  such  as  are  usually  charged,  and 
can  in  most  instances  be  estimated  without  reference  to  previous  entries. 

We  will  suppose  then  that  A.'s  goods  are  all  sold,  and  the  Credit  side  of  his  Sales  account 
is  $5,845.80  ;  Debit  blank. 

We  charge  for  Labour 

"         "        "    Cartage 

"         "        "    Postages 
Our  Commission,  5  per  cent., 
Net  proceeds  due  A. 

Gross  proceeds 


15.00 

18.50 

25 

33.75 

. 

292.29 

• 

5,519.76 

• 

$5,845.80 

We  are  now  authorized  to  make  the  following  entries  on  the  Journal 
33.75 


A.'s  Sales       . 

To  Charges 

For  Labour 
"  Cartage 
"    Postages 


15.00 

18  50 

25 


33.75 


A.'s  Sales     .... 
To  Commission   . 

For  our  Commission  on  Sales. 


292.29 


292.29 


A.'s  Sales     . 
To  A. 


For  net  Proceeds  due  him. 


5,519.76 


5,519.76 


The  above  three  debits  being  carried  to  A.'s  Sales  account  will  obviously  balance  it.  The 
Charges  account  will  show  returns  for  what  has  previously  been  debited  to  it  for  expenses  on 
these  goods.     Commission  account  will  show  our  gain  by  commission,  and  A.'s  account  will 

8  57 


SEC.  IV.-COMMISSION  BUSINESS. 

show  what  we  must  pay  him.     Hut  the  three  entries  are  much  more  concisely  stated  in  one, 
thus  : 

A. 's  Sales  to  Sundries    ....  ■>:>.M.~».-u 

For  closiii"  this  account  as  per  Account  sales. 

Tb  Charges 33.7:. 

••    Commission.  .......     202.29 

"    A.  for  his  net  proceeds  ......  5,519.76 

So  far  ire  have  treated  of  what  may  he  considered  the  general  routine  of  business  pursued 
by  shipping  and  oommissioi)  merchants.     Hut  there  is  s  great  variety  of  business  done  on 

commission  on  a  small  scale,  to  which  it  would  be  absurd  to  apply  all  these  formalities.  For 
example  :  suppose  we  were  to  put  into  the  hands  of  a  Bookseller  500  copies  of  Join  b*S  '■ 
keeping,  allowing  him  a  certain  commission  on  the  sabs;  the  bookseller  need  not  open  such 
account  as  Jones s  Sales.  It  would  be  quite  sufficient  to  open  u  account  with  Thomas 
Jones,  and  pass  to  his  credit  the  proceeds  of  each  sale,  and  charge  him  with  expenses  and 
commission,  keeping  copies  of  invoices,  and  comparing  quantity  remaining  on  hand  and 
quantity  sold,  with  quantity  received.  The  same  course  may  be  pursued  in  numerous  cases 
where  it  is  not  necessary  to  render  Account  sales  of  each  particular  parcel  separately,  and 
where  settlements  are  made  periodically  for  all  sold  during  three,  six,  or  twelve  months. 
After  the  general  arrangement  and  objects  of  accounts  is  once  thoroughly  mastered,  the  book- 
keeper must  expect  no  other  guide  than  his  own  judgment  to  meet  these  minor  points  ;  and  if 
he  only  study  simplicity,  and  adopt  whatever  course  appears  most  brief  and  easily  understood, 
he  will  not  go  far  astray. 

EXERCISE  IX. 
Journalize  and  post  the  following  month's  transactions,  and  take  a  Trial  Balance. 

New  York,  April  1st,  1-I-. 
Received   ^   Patrick   Henry,   to   be  sold  for  account  of  Janus  Kelly,  London,  20  cases 
Linen  Diaper,  Linen,  and  Demi  Linen,  ^  I.  B. 

Paid  cash  for  Duties        ....         474.32 
ii      ii    Freight      ....  14.40 


EXAMINATION. 

What  is  lli.'  person  rilled  who  consigns  goods  to  lie  sold  on  Commission  7 

-  —The  i  ioaatgnnf 
What  is  tin-  person  c  tiled  "ho  receives  them  for  that  purpose  7 
jiiMicer. — The  Consignee, 

OBstga  | Ii  to  In-  -old  in  I Ion  on  \ «>nr  account,  what  account  do  you  OfM  ! 

r  —Shipment  to  London 
London   consigns  goods,  to  \ou  tor  sale  on  his  account,  w  hat  account  would  vou  open  for  the  sale  7 
.'Insurer.—  \  '$  Bales. 

How  would  you  arrange  your  Ledger aeeoont of  A.'bmImI 

Jlwam sr.— Credit  it  with  nil  the  pmreedi. 

Wh  it  do  you  enter  on  the  Debit  tide  ' 

Jlnateer.— In  MOM  eases  nothing,  until  the  gOOdl  are  all  told;  in  others,  Duties,  Freight,  ic. 

wiiit  do  j on  then  .•  n t.-r  I 

.sa*w*r.— The  expense*  not  before  charged,  and  net  nroeeedi  fai  the  owner. 

What  then  doM  the  balance  ol  the  aeconnl  show  | 

i  he  ocoiint  shows  no  bal  inee  .  the  net  proeeedi  and  expeneei  moal  i>e  equal  to  the  gross  proceeds. 
\\  hen  you  nay  petty  expenses  on  A.'s  goods,  srhat  account  do  you  debit  ! 

jinswrr — Charges. 

I>  *•>  not  tin.  iuik.>  the  Charges  account  thou   BON  than  the  arm  d  exiienses  on  your  ov.  n  business  ' 

Antxttr 

llow  is  tin-  ractttV  ,|  | 

Amwrr  ,i  to  Charges  when  the  sales  an  closed. 

II  >oii  receive  S..IXMI  worth  Of  foods  (O  sell  lor  A  .  «  hat  Journal  entry  do  ran  make  • 

N..MI- 

Where  do  \  on  i  nti  t  the  ir: . 

Anlirrr        In   III.    I    OmmisslOfl   liuoii-r   Hook. 

It  >..ii  pay  fun  ii- \   -  goods,  wrhal  entries  si 

Antietr.—-  Charges  In  C  uh." 

Whj  do  yon  not  debii  \.-  -  ties  at  ones  «  Ith  the  expanses  | 

.intver.— it  Is  gsssrallj  rmuhJ  mors  soavsalsnt  looV  bit  all  |»-u>  axpeaaat  ai  one.  »i„.n  tho  sales  are  closed. 


COMMISSION    BUSINESS. 

April  2d,  1848. 

Sold  Houghton  &  Arnold,  at  8  mos.,  80  pieces  Linen  Birdseye  Diaper,  as  ^  Commission 
Sales  Book,  $253.84. 


Sold  James  H.  Elliott,  60  ps.  Linen  Diaper  "$  Patrick  Henry,  amounting  to  $280.01,  and 
received  in  payment  his  note  @  6  mos. 


Sold  William  F.  Sands,  20   ps.  Linen  $  Patrick  Henry,  @  8  mos.  $234.45  ;  also   mer- 
chandise, $  Sales  Book,  @  2  mos.  $253.20. 

Received  his  note  in  payment  for  .  .    500.00 

"         the  balance  in  cash        .  .  $317.65 

3d. 
Sold  Daniel  O.  Gibb  for  cash,  Linens  $  Patrick  Henry  $277.89. 

5th. 

Sold  James   Mason,   Linens  ^   Patrick  Henry,  @  8  mos.   from  25th,  $124.70 ;    also   a 
quantity  of  merchandise,  ^  S.  B.  $342.84. 

Received  in  payment  Jno.  Brown's  note  for       250.00 
Also  his  note  for  balance       .  .         .         $217.54 


Sold  William  Thompson,  Linens  <p  Patrick  Henry,  at  8  mos.,  and  received   in  payment 
his  note  for  $123.22. 


Sold  John  Brown,  at  8  mos.  from  30th,  20  ps.  Linen  ^  Patrick  Henry,  and  received  his 
note  in  payment  $260.50. 


Paid  sundry  charges,  as  ^  Petty  Cash  Book  $153.20. 

6th. 
Taken  to  my  own  account,  60  ps.  Linen  ^  Patrick  Henry,  at  8  mos.  $405.47. 


Paid  Marine  Insurance  on  goods  ^  Patrick  Henry  £470   14s.   0d.,  @   $5-1JW  ^  £  at 
1£  per  cent.  $38.83. 

8th. 

Sold  John  Wilson,  60   ps.  Linen  ^  Patrick   Henry,  and  received  his  note  at  9  mos. 
$362.40. 

10th. 

Sold  Joshua  Powers,  20  ps.  Linen  ^  Patrick  Henry,  and  received   his  note   at  10  mos. 
$225.25. 

59 


r ~-»-^- 


SEC.  IV— JOURNALIZING. 

April  15th,  1848. 

Sold  Charles  Fletcher,  20  ps.  Linen  $  Patrick  Henry,  and  received  his  note  at  8  mos. 
$210.80. 

16th. 

Sold  Isaac  Ames,  GO  ps.  Linen  ^  Patrick  Henry,  and  received  his  note  at  8  mos. 
1362.22. 

L8th. 

Sold  Charles  E.  Minor,  40  ps.  Linen  ^  Patrick  Henry,  and  received  in  cash  §492.23. 

19th. 

Closed  sales  tjp  Patrick  Henry,  and  rend  ired  Account  sales. 

Charged  for  Interest          ....  21.34 

Sundry  Charges       .....  77.76 

Commission      ......  271.12 

Net  proceeds  to  Cr.  of  James  Kelly       .          .          .  2,717.21 

EXERCISE  X. 

The  merchandise  on  hand  valued  at  $5,600  ;  ship  Europe,  J  $12,^00  ;  Shipment  to  London 
at  cost  ;    Hank  Stock,  82,000  ;    Rpal  Estate,  $14,000. 

Make  out  your  Analysis,  journalize  your  Profits  &  Losses,  and  balance  all  accounts, 
except  Personal. 

ACCOUNT     SALES. 

In  the  following  form  of  Account  sales  some  explanation  will  be  required  to  enable  the 
pupil  to  understand  it.  1st.  There  are  twenty  cases  of  goods  sold,  which  are  numbered  from 
1  to  20.  Then  the  first  sale  is  two  cases,  viz.  1  and  5.  Case  1  is  sold  at  8  mos..  and 
consists  of  forty  pieces,  in  which  there  are  five  different  qualities,  numbered  from  1,001  to 
1,005.  Then  five  pieces,  comprising  one  of  each  quality,  are  called  a  round,  or  set,  and  as 
the  piece  numbered  1,003  is  worth  nineteen  cents  per  yard,  and  each  number  above  and 
below  varies  one  cent  per  yard,  the  lowesl  is  worth  seventeen  cents,  and  the  highest  in  the 
round  twenty-one  cents;  consequently  the  average  price  of  the  round  of  five  pieces  is 
nineteen  cents  per  yard,  and  there  being  forty  pied  S  in  the  first  case,  there  are  eight  rounds, 
containing  in  all  622j  yds.,  at  nineteen  cents. 

In  ease  ti  there  are  only  lour  rounds,  or  twenty  pieces. 

Now  we  may  go  on  to  fill  a  volume  with  such  explanations  as  these,  the  greater  pari  of 
which  would  be  forgotten  as  soon  as  learnt,  livery  different  business  presents  a  variety  of 
such  details,  which  the  most  experienced  book-keeper  would  have  to  learn  on  undertaking 
the  accounts  of  a  new  line  of  business.  No  beginner,  therefore,  need  be  apprehensive  o? 
losing  caste  from  betraying  ignorance  in  these  mRtt<  rs,  they  are  such  as  none  arc  expected 
to  be  familiar  with  but  those  brought  up  in  the  business. 

We  give,  in  addition  to  the  Ace, nut  sales  connect)  d  with  the  last  i  xercise,  an  example  of 
an  Account  sale  of  cotton — which,  although  different  in  form,  "ill  require  no  further 
explanation.* 


'  Perl  l«nt  will  think  more  of  thme  document*  when  ha  I    told  that  they  represent  actual  Irajuaettona.  MS  IN 

exact  copM  <>i  Account  nlea  renderi  d,  the  latu  ■  bj  the  emiaenl  houM  »  hoe*  name  It  bean, 
00 


ACCOUNT    SALES. 


Account  Sales  by  James  Strong  on  account  of  Mr.  James  Kelly  {London), 
$  "  Patrick  Henry,"  1  @  20. 


1848 
April 


18 


April 


8  mos. 

1 

it 

5 

6  mos. 

2 

« 

6 

8  mos. 

12 

Cash 

16 

u 

20 

8  mos. 

25th 

3 

(i 

4 

a 
(t 

30th 

13 
14 

« 

17 

9  mos. 

19 

« 

7 

10  mos. 

8 

8  mos. 

10 

8  mos. 

25th 

9 

« 

K 

18 

Cash 

11 

« 

15 

3  Lin.  Birdseye  Diaper 


4-  Linen 


-*-  Demi  Linen     . 

U  it 

f  Lin.  Birdseye  Diaper 

\  Linen 

•f-  Demi  Linen  .. 


-^  Linen 


-$■  Demi  Linen 


-J-  Linen 


1001-1005 
1011-1015 

1001-1005 
26-30 

66-70 
101-105 
121-125 

1001-1005 
1001-1005 

76-80 

u 

101-105 

111-115 
36-40 


46-50 

36-40 

111-115 


56-60 
76-80 


40 

622£ 

19 

40 

645^ 

21 

40 

639^ 

17 

20 

525 

33 

20 

521 

45 

40 

5184 

26 

40 

520£ 

27i 

40 

639.1 

191 

40 

648^ 

19 

20 

521 

50 

20 

521 

50 

40 

517| 

28 

40 

522| 

29 

20 

527 

40 

20 

530 

42h 

20 

527 

40 

20 

530 

40 

40 

518 

29 

20 

527 

49 

20 

520 

45 

Charges. 


Cash  paid  Duties         ....... 

"       "     Freight 

Marine  Insurance  on  £470  14s.  Od.  $5  fl  $  £@l£  ^  cent 

Interest  to  26th  Oct.  1848 

Entry  Bond  and  Permit  ..... 

Cartage,  Receiving,  and  Delivering 
Storage,  Labour,  and  Fire  Insurance 
Commission  and  Guarantee  1\  per  cent. 


Net  proceeds  due  23-26  Oct.,  1848. 


E.  E. 


New  York,  20th  April,  1848. 


118 
135 

108 
173 


134 
143 


260 
144 


151 
210 


212 
150 

258 
234 


474 
14 
38 
21 
2 
12 
63 

271 


23 
61 

76 
•J  5 


75 
14 


50 

9- 

60 

80 


00 

2-2 

21 
00 


32 
40 
83 
34 
50 
00 
26 
12 


253 

282 
234 

277 

124 

123 
260 

405 


84 

01 
15 

S9 

70 
22 
50 

17 


362  40 


225 
210 

362 


492 


3,614 


25 
80 

22 


23 


93 


897 


2,717 


77 


21 


61 


SEC.  IV.-ACCOUNT   SALES. 


3239 


Account  Sale  of  108  Bales  Cotton,  received  ^  "Siddons,"  Cobb,  Master,  from  New  York,  and 
sold  by  order  of  C.  H.  Marshall,  Esq.,  of  New  York,  for  account  of  M.  Crotty,  Esq.,  or 
whom  it  may  concern. 


1-17 
Nov.  24 


25 


Bules.        Gross. 

Cl.    qr.    lbs. 

HL  23  =  77-2-  5 
DD  15  =  62.0.27 
$  24  =  70*2-23 
JL  23  =  67-2-27 
JE  3=  8-2-20 
TT  10  =  28-3  15 
WL10  =  34-2-26 


Dft 

Cl.  qr.  Ibi. 

'  23 

'  15 
'  24 
■  23 

1  3 
1  10 
:  10 


Tare. 

Cl.  qr.  Ibf. 

2-3-  1 
2-0-24 
2-2  •  2 
2118 

01-  7 
1-0-  3 
10-27 


74-2-   9  Net  or  8,353  lb 

59-3*16  "  6,708 

67-3*25  "  7,613 

65.0.14  "  7,294 

8-1-10  "  934 

27-3-   2  "  3,110 

83*1*17  "  3,741 


Charges. 

Dock,  Town,  &c,  dues 

Freight  on  37,216  lbs.  @  £d.  per  lb. 


Primage  5  per  cent. 


Cartage,  porterage,  canvas,  twine,  and  postages 
Insurance  from  Fire      ..... 

Warehouse  Rent  ...... 

Interest  on  Charges       ..... 

Bank  Commission,  4;  per  cent. 


Brokerage,  \  per  cent. 


4} 

4* 
5 
5 
5 

•Mi 
-Hi 


$ft> 


108=350-2-3  "3-24  12-1-26  337-0- 9 Net  or 37,753  tb. 


165 


6 


.      £ 

£19  7s.  8d. 

£0   19s.  4d 


Commission  and  Delcredere,  1\  per  cent. 

Net  proceeds  to  the  credit  of  Chas.  H.  Marshall,  Esq. 


For  account  of  whom  it  may  concern,  in  account  current. 
Pr.  8th  March,  184S. 

Errors  Excepted. 

Liverpool,  27th  Nov.,  1*47, 

PPn.  BARING  BROTHERS  &  Co., 

L.  PINE. 


in 


16 


L3215 
158  12 

151  1!) 


19 

62 
75 


765 


64 


£  700 


62 


SECTION     V. 


CASH     BOOK. 


The  Cash  Book,  as  its  name  implies,  is  a  record  of  only  cash  transactions ;  the  left  hand, 
or  Dr.  side,  being  appropriated  to  cash  receipts,  and  the  Cr.  side  to  cash  payments ;  the  two 
sides  making  one  folio. 

Where  the  business  is  of  such  a  nature  that  the  transactions  are  partly  for  cash,  as 
exemplified  in  the  last  month's  transactions,  the  Journal  is  compiled  from  the  Day  Book,  and 
the  Cash  Book  is  kept  only  as  a  memorandum,  to  show  the  daily  balance  of  cash  on  hand. 
But  in  most  cases  the  cash  transactions  are  not  entered  on  the  Day  Book  at  all,  but  journalized 
daily  or  monthly  from  the  Cash  Book,  thus : 


Dr. 


CASH. 


Cr. 


Jan.  1 


*To  Balance  on  hand    . 
'    Merchandise  sales  . 
'   Jno.  Brown  on  account 
'    Wm.  Price  "         " 


"  Balance 


5,000 
650 
500 
300 


6,450 


$4,150 


00 


00 


Jan.  1 


rood; 


By     Merchandise, 

bought  

"       Houghton  &  Arnold, 

on  account       . 
"  Charges,  petty  cash  . 
"  James  Allen,  on  act. 
"  Balance 


1,500 

500 

50 

•250 

4,150 

S6,450 


00 

00 

00 
00 
00 

00 


Journal  Entries  resulting  from  the  above. 
Cash  to  Sundries.     Receipts  this  day 


1,450 


To  Merchandise. 
"    Jno.  Brown. 
"    Wm.  Price. 


Sales 

On  account 


Sundries  to  Cash.     Payments  this  day 
Merchandise.  Goods  bought 

Houghton  &  Arnold.     On  Account  . 
Charges.  Petty  Cash 

James  Allen.  On  Account  . 


; 

500 

• 

300 

2,300 

1,500 

500 

50 

250 

It  must  be  borne  in  mind,  therefore,  that  in  making  entries  on  the  Cash  Book  every  entry 
is  double.  For  example  :  we  receive  cash  $650,  and  enter  it  on  the  Debit  side  of  the  Cash 
Book ;  but  we  cannot  carry  this  same  amount  into  the  Journal,  without  knowing  what 
account  in  the  Ledger  must  be  credited  with  that  sum.  Hence  to  provide  for  this  we  write 
"  To  Merchandise,"  which  not  only  explains  the  transaction  of  selling  merchandise  for  cash, 
but  shows  also  that  the  Merchandise  account  must  be  credited.     In   addition  to  the  name  of 


The  Balance  is  never  journalized. 


63 


SEC.  V.-CASH  BOOK. 

the  account  to  be  credited,  with  each   receipt  is  usually  added,  in  a  smaller  hand,   a  few 
words,  explanatory  of  the  transaction.     (Sue  Cash  Book,  sec.  I.) 

EXERCISE  I. 

Enter  the  following  transactions  in  a  Cash  Book,  taking  a  whole  page  for  the  debit,  and  its 
opposite  for  the  credit.* 

March  1st,  1848. 

Cash  on  hand  this  day      . 4,840.27 

2d. 
Bought  for  cash  a  quantity  of  goods,  as  per  I.  B.  .  .  .  780.50 

3d. 
Paid  charges,  as  per  Petty  Cash  Book 150.00 

4th. 
Paid  for  my  note,  due  this  day  ......        1,000.00 

5th. 
Sold  merchandise  for  cash  .......        2,560.42 

6th. 
Paid  for  my  own  note  of  $1,800,  due  26th,  and  reed,  the  discount  4.50 

Hire  it  must  be  remarked,  that  if  we  entered  on  the  Credit  side  of  the  Cash  Book 
only  the  net  amount  actually  paid,  viz.  1,795.50,  and  wrote  "By  Bills  Payable  1,795.50," 
the  Bills  Payable  account  would  require  an  additional  debit  of  $4.50,  to  write  off  the  note 
redeemed  ;  and  the  Interest  account  would  require  a  credit  to  show  the  gain  by  interest 
$4.50  ;  and  we  should  have  to  enter  on  the  Journal,  Interest  to  Bills  Payable  for  discount  on 
note  $4.50,  making  an  entry  of  one  transaction  on  two  different  books.  The  same  thing  is 
accomplished  in  a  more  simple  way,  by  entering  on  the  Credit  of  Cash  Book  "  By  Bills 
Payable  $1,800  ;  this  puts  the  Bills  Payable  account  right,  but  the  Cash  is  over  credited  ; 
we  therefore  enter  on  the  Debit  of  Cash  "  To  Interest  $4.50,"  and  the  Cash  is  rectified,  the 
Interest  account  credited,  and  all  is  made  right.  It  will  frequently  happen  that  such  devices 
have  to  be  resorted  to,  and  the  student  can  only  prepare  himself  to  meet  such  cases  by  con- 
sidering  what  accounts  are  disturbed  by  a  transaction,  and  how  he  may  provide  entries  that 
will  rectify  them. 

7th. 
Received  from  Jno.  Adams,  on  account     .....  1 ,258.24 

8th. 
Paid  Frederick  Smith,  on  account    ......  584.29 

9th. 
Bold  for  o  ish  goods  as  follows  : 

'I'm  James  Brown 587.48 

«    Edwd.  Price 105.82 

"    Jno.  King 884.29    11,467.04 


•These  tnanettoni  have  no  reference  to  Uu  btulneu  of  JunM  Btrong;  Iheti  objocl  li  ilmplj  to  toaau  the  proa 
nmkiriL'  entriM  hi  toe  Oub  Book. 

lil 


CASH   TRANSACTIONS. 


March  10th,  1848. 

The  North  River   Bank    has  discounted    Jno.    King's    note    for 
Discount         .......... 

11th. 

Paid  my  note  due  this  day  at  the  North  River  Bank 

12th. 

Received  the  amount  of  Henry  Wheeler's  note  due  this  day 
"  for  Cash  sales  .  .         . 


13th. 


Received  of  Jno.  Adams,  on  account 

14th. 

Received  for  Cash  sales  of  goods  this  day 

15th. 
Paid  for  Stationer's  bill    . 
"       «    Coals 


Paid  for  merchandise  bought    . 
Received  for  Cash  sales  . 


16th. 


17th. 


Received  from  John  Adams,  on  account 
"         for  Cash  sales 


18th. 


Received  for  the  following  notes  : 
George  Ingersoll's 
W.  Seymour's 

"         for  Cash  sales  . 


19th. 


Received  for  renewal  of  William  Goodwin's  note 

"  "    Cash  sales  .... 

Paid  for  goods  bought      .  .         .         . 


21st. 


Paid  for  my  note  due  this  day 


22d. 


3,000.00 
35.43 


587.53 


970 
325.24 


257.00 


1,750.82 


157.28 
35.29 

192.57 

. 

297.23 
1,230.29 

• 

200.00 
530.28 

.    1,200 
.    1,000 

2,200.00 

• 

857.90 

• 

11.42 

231.24 
520.64 

Received  for  Cash  sales  ....... 

Paid  for  goods  bought  at  auction       ...... 

"     Frederick  Smith,  on  account    ...... 

23d. 

I    have    accommodated   James    Brown    by  discounting  William 

Price's  note  of  $753.50.     Discount 

Received  for  Cash  sales  ....... 

24th. 
Paid  Henry  Brown,  on  account  of  Frederick  Smith    . 

9 


500.00 


589.24 
120.32 
100.00 


12.84 
324.25 


58.42 


65 


— 


SEC.   V.-CASII  BOOK. 

March  26th,  1848. 


Received  for  Cash  sales 
Paid  for  <roods  at  auction 


27th. 


Received  the  amount  of  James  Thorn's  note 

"         for  Cash  sales  ...... 

Paid  my  note  due  this  day       ...... 

28th. 

Received  for  Cash  sales  ...... 

"         from  Wm.  Brown,  on  account  of  Houghton  &  Arnold 


29th. 


Received  for  Cash  sales 

"         of  John  King,  on  account 
Paid  for  goods  at  auction 


30th. 


Received  of  James  Brown,  on  account 
"         for  Cash  Sales 


31st. 


Paid  my  note  due  this  day 


325.24 
976.84 


563.40 
250.75 

123.24 


324.27 
128.27 


257.28 
150.00 

758,24 


500.00 
275.00 


1,500.00 


JOURNALIZING    THE    CASH    BOOK 


We  have  already  exemplified  and  taught  the  process  of  posting  from  the  Cash  Book, 
Invoice  Book,  etc.  ;  and  it  now  remains  to  be  shown  how  the  contents  of  such  books  may  be 
passed  through  the  Journal,  so  that  the  advantages  of  either  method  may  be  fairly  estimated. 
In  posting  from  the  Cash  Book,  every  separate  receipt  makes  a  credit  posting  to  the  Ledger  ; 
but  in  journalizing  these  receipts,  we  may  collect  into  one  sum  all  the  credits  to  be  passed  to  any 
one  account.  For  example  :  we  may  find  that  during  the  month  we  have  received  cash  six 
times  for  Bills  Receivable,  and  instead  of  making  six  credit  postings  to  that  account,  we 
collect  them  all  into  one  sum,  thus — 

14,000 


9,500 


Cash  to  Sund 

ries. 

Receipts  this  month 

To  Bills 

Receivable 

4th 

2,000 

<(      (i 

<< 

8th       . 

8,000 

<<      (i 

a 

10th 

2,000 

<(      << 

<< 

1-th 

1,000 

u      << 

<( 

21st 

500 

U          <( 

<< 
jhandise 

25th 

i  lib 

1,000 

To  Men 

2,500 

(i 

(i 

L8th 

1,500 

(< 

(i 

'J  1  St 

500 

4,500 


By  this  means  only  three  postings  are  required  instead  of  ten,  and  the  Ledger  shows  all 
that  is  wanted;    moreover,  by   bavins   Fewer  amounts,  onlj    twelve  each   year,   immense 
labour  is  saved  in  adding,  ohecking,  and  calling  off.     The  amount  of  men  writing,  it  is  true, 
60 


SEC.   V.-MONTHLY   JOURNALIZING. 

is  about  the  same,  as  what  is  omitted  in  the  Ledger  must  be  written  on  the  Journal  ;  but  we 
must  not  forget  how  very  much  easier  it  is  to  write  the  whole  on  one  place  on  the  Journal, 
than  to  distribute  it  over  so  many  different  pages  in  the  Ledger. 

The  following  process  will  very  much  facilitate  the  work  of  making  a  monthly  journal 
entry.  On  a  piece  of  loose  paper  write  down  from  the  Debit  side  of  the  Cash  Book  the  name 
of  each  account,  to  which  the  credit  entries  are  assigned,  taking  care  to  write  no  title  more 
than  once,  then  note  down  the  several  dates  on  which  the  same  title  occurs,  thus  : 

Cash  to  Sundries. 
To  Jno.  Brown,  4th,  8th,  15th,  20th. 
"    Bills  Rec,     8th,  13th,  17th,  19th,  21st,  23d. 

As  fast  as  the  dates  are  noted  down,  the  Cash  Book  may  be  checked  off  with  a  pencil. 
Proceed  down  the  debit  side,  and  when  a  new  ledger  title  occurs  write  it  down  ;  but  if  one 
you  have  already  written,  merely  note  the  date  after  the  title.  By  this  means  you  will  have 
a  complete  index  by  which  to  make  your  journal  entry ;  you  will  see  at  once  on  what  dates 
you  are  to  look  for  credits  of  Jno.  Brown's  account,  viz.  4th,  8th,  15th,  28th. 

The  same  process  is  of  course  applicable  to  journalizing  the  Credit  side  of  Cash  Book,  as 
well  as  to  the  Invoice  and  Sales  Books,  &c. 

EXERCISE  II. 
Journalize  the  cash  transactions  from  the  Cash  Book. 


MONTHLY    JOURNALIZING. 

It  will  be  perceived  by  journalizing  the  Cash  Book,  instead  of  posting  the  amounts  directly 
into  the  Ledger,  that  a  large  amount  of  posting  is  saved  ;  and  the  same  advantages  would 
result  from  journalizing  the  Invoice  Book,  Sales  Book,  and  Day  Book,  in  the  same  way, 
precisely  in  the  order  exemplified  in  sec.  I.  There,  however,  the  entries  are  already 
collected ;  but  the  student  who  has  once  journalized  a  Cash  Book  will  readily  understand 
how  to  manage  the  details  of  a  monthly  entry  made  from  any  other  book.  The  entries  on 
the  Ledger  from  this  process  will  be  so  few,  that  a  trial  or  balance  sheet  can  be  taken  in  one 
tenth  part  of  the  time.  Now  for  the  objections  to  be  offered.  The  only  serious  one  we  are 
acquainted  with  is  that  the  books  are  always  a  month  behind,  and  that  personal  accounts  are 
therefore  not  ready  when  wanted. 

It  is  strange  how  few  qualify  themselves  sufficiently  by  a  general  view  of  the  principles  of 
the  Ledger  to  obviate  so  trivial  a  difficulty  !  Why  not  keep  the  personal  accounts  posted 
up  ?  There  is  surely  nothing  more  easy  than  to  post  daily  from  Sales  Book,  Cash  Book, 
Invoice  Book,  and  Day  Book,  all  debits  and  credits  of  Personal  accounts.  Then  in 
journalizing  from  Sales  Book  say — 

Sundries  to  Merchandise          .         .  .         .         9,000 

Bills  Receivable 5,000 

Personal  Accounts  posted         .         .         .  4,000 

and  in  posting  the  Journal,  the  item  of  Personal  accounts  is  at  once  understood  as  not  to  be 
posted.     The  same  process  is  of  course  applied  to  the  other  books,  for  example : 

Cash  to  Sundries    . '  .  .  .  .  .        11,000 

To  Bills  Recfivable         ....  3,000 

"    Merchandise 6,000 

"   Personal  Accounts  posted  .         .  2,000 

67 


SEC.  V.-GENERAL   ROUTINE. 

The  practitioner  will  very  soon  perceive  that  by  introducing  a  money  column  on  his  Sales 

Book,  In\  k,  and  Day  Book,  into  which  be  carries  all  amounts  he  int.  n-1^ 

to  post  direct  to  Pi  rsonal  accounts  without  journalizing,  he  has  only  to  add  those  columns  and 

ire  them  with  his  journal  entry  to  prove  his  postings,  thus:    In  his  Sales  Book  he  finds 

by  adding  aaid  money  column  thai  (4,000  has  been  posted  to  debit  of  Personal  accounts,  and 

as  that  exact  Bum  is  wanted  to  balance  his  journal  entry,  that  is  to  make  his   debits   equal  the 

it  of  merchandise,  he  has  assurance  that  bis  Ledger  will  balance. 
We  may  g  i  on  to  exemplify  an  indefinite  Dumber  of  forms,  showing  bow  money  columns 
may  be  employed  in  different  books  to  collect  this  or  thai  class  of  items:   bu1   to  the   inex< 
perienced  they  serve  no  other  purpose  than  to  mystify.     A  thorough   knowledge  of  general 

principles,  and  of  the  nature  of  the  business  to  be  conducted,  is  all  that  is  required  to  prepare 
even  common   ingenuity  tor  suggesting  any  such  of  these  expedienl  ■  e  from  time  to 

time  ostentatiously  heralded  as  new  systems. 


GENERAL    ROUTINE 


We  must  now  say  something  of  original  entries  of  detail  from  day  to  day.  We  will 
suppose  our  business  to  require  the  following  hooks  to  he  used  as  materiel  for  the  Journal 
viz. 

Cash  Book, 
Invoice  Hook, 
Sales  Book, 
Day  Book,  or  Blotter. 

If  we  Bell  a  hill  of  goods  for  cash  we  make  the  entry  on  the  Cash  Book  "  To  Merchandise." 
This,  as  has  been  shown,  secures  its  I,,  Ved  through   the   Journal   to  the  Ledger,  to 

the  credit  of  Merchandise  account  and  debit  of  Cash  account.  But,  says  the  tyro,  this 
sale  of  merchandise,  ami  will  also  be  entered  on  the  Sales  Hook,  and  he  liable  to  he 
journalized  again.  This  difficulty  is  very  commonly  obviated  by  having  a  Cash  Sales  Hook, 
the  use  of  which  is  merely  to  give  the  minute  items  of  detail  thai  could  not  he  entered  on  the 
Cash  11. .ok  ;  that  is,  the  quantity  of  the  goods  and  prices.  Hence  in  selling  goods  for 
an  entry  is  made  in  the  Cash  Book,  which,  for  distinction,  we  will  call  the  principal  entry,  I  > 
pass  it  to  the  Journal,  and  the  bill  is  copied  into  the  Cash  Sales  Book,  as  a  memorandum 
having  nothing  to  do  with  the  Journal.  It  may.  however,  be  employed  as  a  verv  useful 
Check,  as  the  total  (.'ash  sahs  lor    the    month    OUghl    to    agree    with    the    credit    passed    to    the 

Ledger  in  the  monthly  entry  from  the  Cash  Book.  If  no  Cash  Sales  Book  be  kept,  it  is  a 
good  arrangement  to  have  a  separate  column  in  the  general  Sahs  Book  for  Cash  sal.  s 
see.  [.Sales  Book),  and  in  journalizing  the  sales,  of  course  all  carried  into  the  cash  column 
is  omitted.  We  now  buy  a  hill  of  goods  for  cash,  and,  as  before,  make  the  principal  entry  on 
ill'-  ( lash  Book  ;  bul  here  it  is  al  o  necessary  to  copy  the  invoice  into  the  Invoice  Book,  and 
a  separate  column  here  fin-  cash  purchases  will  he  equally  useful,  to  avoid  the  chan< 
journalizing  these  transactions  twice,  viz.  once  from  the  Cash  Hook,  and  again  from  the 
Invoice  Hook. 

We  now  sell  merchandise  on  credit,  and  enter  the  sale  on  the  Sales  Book;  this  entry  is 

sufficient,  as  at  the  end  of  the  n th  we  shall  enter  on  the  Journal   a  credit   to  merchandise 

for  the  t..tal  sahs,  and  a  debit  to  the  several  persons1  aooounts  w  ho  owe  for  them.     If  they 

notes  at  the  time  of  sale,  or  during  the  mouth,  it   is  just  as  easj    to  enter  on  the 

Sales   Book  "Settled  by  N  ■        md   debil  Bills  Receivable,  instead  of  the  person,  and  thus 

avoid  opening  his  account  on  the   I. .deer. 

We  now  suppose  a  customer  cornea   in  with  whom   we  have  an  acoounl  opened  on  the 

his  note.    This  transaction  we  enter  on  the  Daj  B  i  k.  ns  the  principal  entry. 

But  we  must  also  enter  the  Q0te  on  a  Bill  Book,  which  is  merely  used  as  a  memorandum  of 


SEC.  V. -PROTRACTED  SETTLEMENTS. 

the  date  when  due,  and  other  circumstances  connected  (see  Bill  Book),  but  which  has  nothing 
to  do  with  the  Journal  and  Ledger. 

We  now  buy  goods  on  credit,  and  make  the  principal  entry  on  the  Invoice  Book,  which  is 
sufficient ;  but  if  we  at  the  same  time  give  our  note,  and  do  not  wish  to  open  an  account 
with  the  party,  we  enter  "  Settled  by  Note,"  and  enter  the  note  on  the  Bill  Book. 

We  now  give  our  note  to  a  person  with  whom  we  keep  an  account.  This  entry  we  make 
on  the  Day  Book  as  the  principal  entry,  and  the  memorandum  on  the  Bill  Book.  All  entries 
of  transactions,  except  those  specified,  would  be  made  on  the  Day  Book. 

The  transactions  are  now  all  distributed  in  four  books,  and  the  contents  of  each  are  entered 
on  the  Journal  daily  or  monthly,  as  the  nature  of  the  business  may  seem  to  require.  No 
precise  period  can  be  insisted  upon.  It  is  the  attempt  to  lay  down  arbitrary  rules  in  these 
matters,  and  call  them  systems,  that  has  dons  so  much  to  destroy  the  confidence  of  practical 
men  in  printed  book-keeping.  The  journal  entries  of  these  four  books  are  sufficiently 
exemplified  in  sec.  I.,  which  shquld  be  reviewed  until  the  routine  is  understood.  The  outline 
of  the  plan,  if  well  fixed  on  the  mind,  will  readily  guide  the  tyro  in  the  details. 

1st.  All  transactions  of  receiving  or  paying  cash  are  entered  on  the  Cash  Book,  and  con- 
veyed to  the  Ledger  by  a  daily  or  monthly  entry  on  the  Journal".  2d.  All  transactions  of 
selling  merchandise  on  credit  are  entered  on  the  Sales  Book,  and  conveyed  to  the  Ledger 
daily  or  monthly  through  the  Journal.  3d.  All  transactions  of  buying  merchandise  other- 
wise than  for  cash  are  entered  on  the  Invoice  Book,  and  conveyed  to  the  Ledger  daily  or 
monthly  through  the  Journal.  4th.  All  transactions,  other  than  those  named,  are  entered  on 
the  Day  Book,  and  journalized  as  occasion  offers.  Those  who  may  prefer  dispensing  with  a 
Journal,  and  posting  from  subsidiary  books,  have  only  to  follow  the   process   adopted  in  sec. 


PROTRACTED     SETTLEMENTS 


It  is- very  usual  to  sell  several  invoices  of  goods  at  different  times,  over  a  period  of  a 
month  or  more,  without  taking  a  note  until  the  buyer  has  completed  all  his  purchases,  and  is 
about  to  return  to  a  distant  part  of  the  country.  His  account  is  then  made  out,  and  the  time 
of  the  several  purchases  averaged,  and  one  note  taken  for  the  whole.  Now  in  journalizing 
the  sales,  it  must  happen  that  many  will  be  found  unsettled,  where  no  notes  have  been 
taken,  and  where  it  is  not  desirable  to  open  accounts  with  the  buyers  on  the  Ledger.  For 
example  :  we  find  on  the  Sales  Book  that  we  have  sold  John  Brown  during  the  month  three 
separate  parcels  of  goods,  which  we  know  he  will  settle  by  note  in  a  few  days,  and  we  do 
not  wish  to  open  an  account  with  him  by  entering  "  Jno.  Brown  to  Merchandise."  We 
therefore  determine  to  carry  all  this  unsettled  business  of  a  temporary  character  to  the  debit 
of  one  account,  which  wp  may  with  propriety  term  "  Protracted  Settlements."  We 
therefore  enter  "  Protracted  Settlements  to  Merchandise  "  for  goods  sold  Jno.  Brown,  and 
when  Brown  gives  his  note  in  settlement  we  enter  "  Bills  Receivable  to  Protracted  Settle- 
ments," for  his  note  in  settlement  of  his  account.  When  all  such  business  is  settled  up  the 
account  will  balance  ;  but  if  it  shows  a  balance  at  the  end  of  the  year,  it  of  course  goes  on 
the  balance  sheet  as  resources.* 


*  One  objection  may  be  offered  to  this  course,  on  the  ground  that  when  the  buyer  calls  to  settle,  and  gives  his  note,  there  is 
no  account  on  the  Ledger  from  which  the  statement  required  can  be  obtained,  and,  consequently,  it  must  be  picked  out  from  the 
Sales  and  other  books,  at  the  risk  of  item<  being  overlooked.  But  this  is  easily  obviated,  by  keeping  a  book  expressly  for  these 
temporary  accounts,  in  which  an  account  current  is  opened  for  each  buyer,  and  an  entry  made  whenever  a  transaction  occurs 
in  relation  to  "  Protracted  Settlements."  Every  account  may  then  be  ready  when  called  for.  For  example  :  if  we  enter  on  the 
Journal  or  Day  Book,  Protracted  Settlements  to  merchandise  for  goods  sold  John  Brown,  we  at  the  same  time  open  John 
Brown's  account  on  the  hook  f  >r  protracted  settlements,  and  enter  on  the  Debit  side  of  his  account, 
To  Merchandise.        10  cases  Prints        .        .        $. .   . . 

69 


SEC.  V.-GENERAL   ROUTINE. 

I.\  wil\  1TTOM. 

Pupp  wo  we  compile  our  Journal  from  Hal  fash  Book,  Sales  Book,   Invoice  Book,  and  Day  Book,  where  do  we  lint  enter 
i  Inc.  r  ,>ii  '  -.,i  paying  cub  ' 
.  i t.r.-.t  on  the  Day  H> « »k  ? 
ii  .,.,  .  «  hen  do  you  wlef  II  ' 

.Imirrr.—  <ln  the  Cash  Book. 

Mu-t  not  the . : 1 1 r >  be  in  ni>-  also  on  the  Bale*  H<M.k  ^ 

,    rr  —  \'.». 

The  ime  transaction  is  thus  entered  «n  two  books,  both  ofwtaicb  nro  Journalised  :  will- not  tliii  transaction  be  thus  twice 
entered  on  the  Ledger,  once  through  the  Cnab  lii>"k.  end  again  through  the  Bales  lt.».k  I 

i  he  r  tab  sale*  m  ij  be  c  trried  Into  an  Inner  column  In  1 1  • « •  Bales  I!  "k.  and  omitted  in  journali/inc 
:  have  an  account  opened  on  your  Ledger  «  •  i it  John  Broe/n,  be  owing  you  s-'.uoo,  and  you  r.  te  lor  it,  what 

book  do  yon  m  >ke  tin  principal  eatf)  on  T 
Book. 
In  \\  Ii  it  I". .rn>  I 
jlmtn-cr.—  Bills  Receivable        ....       'J.mm 

To  J. .tut  Brown  ....        2,000 

Received  his  note  for  h  dance  due. 
What  other  record  of  the  note  i<  required    and  where  ? 

•r.— An  >ntr\  of  it  must  i>e  mole  in  tin-  Hiii  Book,  lo  show  when  it  become*  doe,  end  other  nartimlafi 
Would  the  Bill  Hook  in  inch  cases  in-  u^.-.i  In  journalizing  ! 
injer.    Wo. 

Ii  .loiin  Brown  gave  hi*  note  for  g la  bought,  end  you  did  not  wish  to  keep  any  account  with  bin  on  your  Ledger,  how 

would  win  in  ike  ih'  entry  ' 

fsv— Enter  opposite  his  hill  oafthe  Bale*  Book  "  Bottled  by  Not  ."  and  m  ike  no  l»  i\  Hook  entry. 
Bow  would  the  transaction  !•<•  passed  In  the  Ledger  ' 

s«r.— Merchandise  would  be  credited  with  the  sale*  in  the  monthly  entry,  ami  Bills  Receivable  debited. 
Under  wh  t  bead  would  this  entry  appear  on  the  Journal  • 
,*7as*Mr.— Sundries  to  Merchandise 

Ii  you  had  this  ante  disc  inn  ted,  and  9d0  were  deducted  for  discount,  and  si.'.'-'O  paid  to  you  in  cash,  how  and  where  would 
you  record  the  <r  inunction  ! 

:    ,,f  the  Cash  H  .ok  •■  To  BUli  Recpiv  ible  13.000,"  end  on  the  Credit  itde  "  By  Interest  $-20." 
Why  not  enter  on  the  C  tah  Hook  ■•  To  Hills  Receivable  tl,9fl  i."  the  net  amount  r.  c  Ivedl 

■  then  an  entry  would  be  required  on  the  Diy  Book  "  [nteresl  to  Bills  Receivable  •90,"  otherwise  the  Bill* 
ble  would  not  be  di'  ch  irge  I   .i  the  whole  note   nor  would  the  Interest  be  shown  In  the  Interest  account. 
Suppose  yon  hold  John  Brown's  note,  due  this  day,  lor  BS,O0O,  and  he  pays  91,000,  and  give*  you  a  new  note  for  the  balance, 
- ;  i  Interest,  bow  would  you  enter  the  transaction  ? 

cur.— On  the  Cash  Hook',  vis.  To  Bill*  Receiv  ible  $990,  and  To  Interest  siO. 
If  the  same  note  h"»d  passed  through  your  hand,  and  wan  held  by  a  b  nk  when  it  had  been  discounted,  and  John  Brow  a  gave 

you  hi-  check  for  51.0111.  and  his  new  note  for  $1,000,  with  which   you    agree    10  lake   the   note   up,   bow  Would   you   enter   the 
lion  ? 

■  i  the  <  !ash  Hook  By  Bill*  Receivable  11,000,  and  To  Interest  S10. 

Wh  ■  ■  be ■  oi  the  other  pari  of  the  pansactton  • 

r — John  Brown  take*  np  half  or  the  note  himself  which  I  n I  nol  record  on  my  books,  except  by  a  memorandum  in 

explaining  the  entry  on  the  Cash  Book      Explain  further .     I   pa]   91*000  cash,  for  which   I   received  ■   note,  and  entered  the 
i  receive  e  i-h  tlU  foi  Interest,  which  I  enter.-. I ;  bui  I  c  rri.,1  91,000  lo  the  hank  for  John  Brown,  which  it  w  t* 

needle-,   lo  enter. 

If  you  compromise  a  biwik  account  owed  you  by  Jim.  Brown  for  91,500  by  liis  paying  you  *-.~>i)  in  cash,  how  weald  you 
record  the  tr  inflection  ? 

Answer  On  the  Cash  Book  "  Cash  to  John  Brown,"  in  settlement  by  compromise  9BS0;  ami  on  the  Day  Book  "Profit  fc 
Loss  to  John  Brown,"  for  lost  on  hi*  Bcconnl  compromised 

Tol  H  due 1,.",  Ill 

i 'ash  received        ....         B50 

Los* 650 

II  .u   would  V   ti  po  t  the  entry? 

Debit  of  Profit  ft  Loss,  and  1650  to  Credit  of  John  Brown. 

Wh  i  |i  done  »  Ith  the  other  ■ nts  in  the  entry  ? 

i  -r     They  .r.-  merely  ezpl  inatory,  and  not  to  be  posted. 
W  in:  i-  underatuod  bj  an  accouiil  of  Protracted  Bettlementi  ' 

\' .  mnts  ill  a  are  Intended  to  be  settled  b>  note  u Ithln  ■  very  short  period, 
w  I.  ii  i    the  u  ■■  of  such  an  account  ! 

opening  >  i.  ...  i  account,  which  woulr1  be  closed  again  In  a  fon  d 

II   i    I     lllple. 

I  s(.|i  joh  i  ii.--  good*  on  three  mo  .th-.  and  make  the  entry  to  day,  bat  he  doe*  not  give  his  note  for  perhep*  ■  weal ,  my 
entry  would  bo  therefore  .1    in  Da   in  Merchandise,  and  when  1  got   his  note,  "Bill*  Receivable  lo  John   Doe.  '    Thus  John 
.  mint  would  be  closed  immodlatelj  after  opening  It,    By  ii  tvlng  inch  account  as  Protracted  Settlement*  1  could  • 
■  that  account,  and  iims  throw  numerous  account*  Into  one, 

\\  h     I    W<  .ii  .1    III  it   ...  r.ilinl      how     ' 

for  which  we  had  not  taken  notes,  as  agroed 

Bot*    \\.  ill  I  it  lie  Ii  i  lam  -ell  ' 

ii  would  balance  when  all  had  given  their  note* 
Butsl Id  that  not  be  the  case,  wben  yon  are  making  oul  your  Anal)  sis,  or  Hiiame  Sheet,  how  would  you  dispose  of  the 

jtnivt  r     Bet  It  down  as  Resources. 


70 


COMMERCIAL    ARITHMETIC. 


SECTION     VI 


PER    CENT  AGES. 


The  student  is  expected  to  be  well  acquainted  ivit/i  decimal  and  vulgar  fractions . 

Profits,  losses,  commissions,  interest,  premiums,  discounts,  and  various  other  mercantile 
estimates,  are  rated  as  so  much  per  cent.  Thus  if  I  lay  out  $100,  and  receive  back  $150, 
I  gain  fifty  per  cent  (written  50  %).  If  I  pay  $105  for  stock,  which  is  responsible  for  $100, 
I  pay  five  per  cent,  premium. 

The  money  on  which  the  per  centage  is  to  be  taken  may  be  called  the  principal. 

The  principal  added  to  the  per  centage  may  be  called  the  amount. 

Case  1. — The  principal  and  rate  per  cent,  given  to  find  the  per  centage.  For  example  : 
required  the  commission  on  $5,000  at  3  per  cent. 

Case  2. — The  amount  and  rate  per  cent,  given  to  find  the  principal.  For  example  :  how 
much  with  3  per  cent,  added  will  make  $5,150? 

Case  3. — To  find  an  amount  which  after  deducting  a  certain  per  centage  will  leave  a 
given  amount. 

Case  4. — The  per  centage  and  amount  given  to  find  the  rate.  For  example  :  I  have 
$5,150,  of  which  $150  is  gain,  what  is  the  gain  per  cent,  on  the  principal  ? 

Solution  of  Case  1.  $100  principal  gives  $3.00,  consequently  the  per  centage  is  T£,  of 
the  principal  ;  or,  expressed  in  decimals,  .03.     Then,  principal  $5,000  x  .03,  gives  $150. 

Hence  the  rule.  Multiply  the  principal  by  the  rate  per  cent,  expressed  as  a  decimal 
fraction.     If  3£  per  cent.,  .035  ;  if  '<Jf ,  .0275,  and  so  on. 

Solution  of  Case  2.  The  amount  $5,150  is  composed  of  principal  and  per  centage,  which 
we  wish  to  separate.  Suppose  then  we  count  from  the  sum  $100,  and  set  it  apart  as 
principal,  and  $3  as  premium,  and  so  go  on  until  we  have  told  out  the  whole  sum ;  we  shall 
then  have  a  practical  solution,  and  our  answer  will  be  as  many  $100  as  we  were  able  to  lay 
down  $103.  By  division,  then,  we  find  we  could  do  this  fifty  times,  and  our  answer  is  fifty 
times  one  hundred,  or  5,000. 

Hence  divide  the  amount  by  $1,  with  per  centage  added,  as  1.03. 

This  is  sometimes  called  discount  on  the  dollar,  to  distinguish  it  from  discount  in  the  dollar, 
which  we  call  Case  3. 

For  example  :  I  have  $5,000  due  me  in  Vera  Cruz,  when  exchange  is  3  per  cent, 
discount,  and  my  correspondent  desires  me  to  draw  on  him  for  as  much  as  will  give  me  the 
debt  in  full.     For  how  much  must  the  bill  be  drawn  ? 

Solution.  We  can  sell  a  bill  of  $100  for  $97,  hence  if  the  debt  were  $97  we  must  draw 
for  $100 ;  the  debt  therefore  is  T\7„  of  the  sum  drawn  for,  and  the  sum  drawn  for  is 
W°  of  the  debt.  Hence  debt  $5,000 xyT°=$5l54. 63  answer.  Or,  we  must  draw  for 
$100  every  time  we  find  $97  contained  in  $5,000,  and  for  $1  one  hundred  times  as  often  as 
for  $100  ;  that  is  as  often  as  97  is  contained  in  100  times  5,000. 

To  find  discount  in  the  dollar  we  therefore  multiply  the  given  amount  by  100,  and  divide 
by  100  less  the  rate. 

Solution  of  Case  4.  The  outlay  was  $5,150  less  gain  $150=$5,000,  then  how  much  per 
cent,  does  $150  give  on  $5,000.  First  divide  the  principal  into  shares  of  $100  each,  and 
we  have  fifty  shares ;  then  the  gain  must  be  divided  into  so  many  parts  as  there  are  shares 
of  $100,  and  150+50=3.     Answer  3  per  cent. 

71 


COMMERCIAL   ARITHMETIC. 

II*  nm  to  find  the  rate  per  cent,  we  may  divide  the  peT  centage  by  ,'-  part  of  the 
principal  ;  bul  it  "ill  be  the  Bame  in  result,  and  easier  in  practice,  to  multiply  the  per 
centage  by  100,  and  divide  by  the  principal. 

I  r  fractions  of  one  per  cent,  express  the  one  per  cent,  thus,  -01  ;  then  divide  fur  any 
fraction  required  thus,  for  one-third  p>  r  cent., 

3)-0100 


•0033 


QUEST  I  ( >XS.* 

1.  What  is  my  commission  on  (3,750.  13  al  2\  per  cent.  ? 

The  student  who  is  familiar  with  fractions  will  often  be  able  to  abbreviate,  thus  2h  is  ^ 
of  100  ;  hence  divide  principal  by  40,  or  5  per  cent,  is  the  ^V  principal,  &c. 

2.  Boughl  merchandise  for  (5,648.20,  how  much  must  I  sell  it  for  to  gain  S\  per  cent.  ?f 
•''..  Sold  merchandise  for  $8,440.52,  and  gained  B^  percent.,  what  did  it  cost? 

4.  Bought  goods  for  (2,350.84,  which  I  Bold  for  (2,897.32,  what  was  my  gain  per  cent.  ? 

5.  Bought  584  yards  of  broadcloth  f>r  .Sl.T.vj.  25,  paid  charges,  freight,  &  3,  and 
duties  36  per  cent.,  at  how  much  per  yard  must  1  sell  it  to  gain  1">  per  cent.  ? 

6.  Sold  goods  at  (4.62  per  yard  which  cost  (4.02,  how  much  per  cent,  did  I  gain  I 

7    Sold  cloth  at  65  cents  per  yard  which  cost  B3  cents,  how  much  per  cent,  did  1  lose? 

8.  I  owe  Richard  Roe,  of  New  Orleans,  $2,000,  which  he  desires  me  to  pay  by  buying  a 
bill  on  that  place,  and  remitting.  1  am  to  charge  £  per  cent,  commission  on  the  amount  I 
pay  for  the  bill.     How  much  do  1  pay.  and  what  is  my  commission  I 

'.).  John  Doe,  of  Mobile,  owes  me  (3,154.20,  payable  in  New  York  funds.  He  instructs 
me  to  draw  mi  him  to  settle  the  debt,  when  bills  on  that  place  sell  at  l£  per  cent,  discount. 
How  much  must  1  draw  for  to  give  me  the  amount  in  full  ? 

10.  I  owe  Charles  Macgregur,  Vera  Cruz,  $3,500,  which  I  am  desirous  of  remitting  when 
tnge  on  thai  place  is  1  per  cent,  discount.  I  am  to  charge  £  per  cent,  commission  on 
the  amount  I  pay  for  the  bill,  and  my  remittance  must  settle  the  account.  What  is  the  face 
of  the  bill,  how  much  the  commission,  and  how  much  cash  do  I  lay  out  ? 


*  it  w  ill  \i-ry  innch  i"i«-iiit.'ii<-  many  of  thi peratioiui  »  ben  the  student  i<  Informed,  that  it';i  fraction  oecnr  la  bii  diritor  be 

amy  reduce  both  dividend  and  divisor  to  the  tame  relative  value.    Thai  divide  346  i>\  Mj 

346 

4  A 

<J7  Ml. 

That  Is,  the  whole  Is  reduced  to  4ths,  anil  we  divide  1384  bj  97 

4  4 

•I,  we  waul  to  divide  3542-96  by  h»oa, 

1001    Then     354*26 

9  a 

Divisor  reduced  90]  I  50(3523.64 

100  divided  b  ne  as  100  divided  bj  the  whole  of  2d.    An]  --'iiii  divided  by  another  son  may  I spew 

ti     Thus  I'm  •  1 1 v  Ided  b)  20  maj  be  expressed  100  90,  and  every  ivr.i  knows  thai  a  rraetlnn  Is  noi  altered  In  »  aloe  ii  we 

multiply  both  lemu  by  the  same  number.    Thus  100  90  Ii  the  si »-  500  100,  >>r  the]  give  the  -:n inotient,  * 

Iways  estimated  on  the  amount  laid  out 


72 


_  = 


SECTION    VII. 


INTEREST 


Interest  is  a  per  centage  allowed  for  the  use  of  money  according  to  the  time  for  which  it 
is  retained  :  it  is  negotiated  and  quoted  as  so  much  per  cent,  per  annum.  Thus,  if  we 
borrow  $100,  and  pay  every  year  $6.00  for  the  use  of  it,  we  pay  6  per  cent.  ;  but  for  any 
portion  of  a  year  we  should  pay  a  similar  portion  of  the  per  centage — thus,  for  half  a  year 
we  must  pay  half  of  6  per  cent.,  or  for  two-thirds  we  pay  two-thirds  of  6  per  cent.  Suppose, 
then,  we  borrowed  $5,000  for  nine  months,  we  may  first  find  the  interest  for  a  year,  which 
is  $300,  and  then  deduct  a  quarter  for  the  three  months,  wanting=$225.  Or  we  may  say 
one  year  gives  6  per  cent. ;  hence  three-quarters  of  a  year  gives  three-quarters  of  6  per 
cent.,  or  4^  per  cent.,  and  4J  per  cent,  on  $5,000  is  $225. 

Hence,  in  calculating  interest  for  part  of  a  year,  we  may  take  the  requisite  part  of  the 
year's  per  centage,  or  the  same  part  of  the  rate ;  or  in  other  words,  we  may  either  proportion 
the  rate  or  the  per  centage  to  the  time  as  best  suits  our  convenience. 

Parts  of  a  year  are  sometimes  computed  in  days,  and  sometimes  as  months  and  days,  for 
example — the  time  from  January  12th  to  March  17th  is,  counting  the  days — 

January            ....  19 

February         ....  28 

March 17 


64 

but  it  is  often  called  2  mos.  5  days;  that  is,  to  Feb.  12th,  1  month  ;  March  12th,  2  months ; 
to  17th,  5  days  more=2  months  5  days. 

Now  a  month,  being  the  twelfth  part  of' a  year,  is  30TS2  days  ;  consequently  2  months  5 
days=65|£  days,  whereas  the  actual  number  of  days  between  the  two  dates  is  64,  as  above. 
We  will  now,  however,  compare  two  other  dates,  say  from  June  12th  to  August  17th — 

Actual  days    ....  66 

2  months  5  days  =         .         .         65-}-f 

so  that  in  this  case  the  months  and  days  give  a  less  portion  of  a  year  than  the  actual  days 
intervening.  Hence  the  computation  by  months  and  days  gives  more  than  the  actual. days 
for  February,  April,  June,  September,  and  November,  all  these  months  having  less  days  than 
SOy'j ;  but  all  other  months  having  more  days  than  30T5j ,  to  compute  them  by  months  and 
days,  gives  less  than  the  actual  time. 

It  follows,  then,  from  these  premises,  that  Interest  accounts  made  up  in  months  and  days 
will  vary  a  little  from  those  made  up  in  days.  Computing  each  day  as  g-J-j  of  a  year,  the 
method  of  months  and  days  gives  more  or  less  than  the  days,  but  they  can  never  be  equal 
unless  by  a  very  singular  coincidence.  But  days  are  often  computed  as  the  ^  of  a  month  or 
'3  6  0  °f  a  year>  a°d  then  the  difference  between  the  two  methods  of  computation  is  considerable, 
as  the  latter  gives  T'g  more  than  the  actual  time.  The  most  correct  computation  of  time  for 
parts  of  a  year  is  the  actual  number  of  days  ;  but  when  days  are  computed  as  g  J-^  of  a  year, 
as  is  commonly  done  for  6  per  cent.,  then  months  and  days  give  nearer  the  truth.  For 
example  :  A  makes  out  an  account  against  me  for  interest  at  6  per  cent.,  in  which  he 
computes  the  actual  number  of  days,  and  then  charges  each  day  as  3^  of  a  year  ;   but  1  may 

10  73 


COMMERCIAL   ARITHMETIC. 

verv  properly  require  him  to  compute  months  and  days,  for  then  I  get  30^  ^or  eacn  month 
instead  of  30  days,  or  at  least  it  will  average  that  nearly.  In  this  way  I  BhaU  pay  very  little 
more  or  less  than  the  actual  interest,  at  :^>">  days  to  the  year,  but  on  the  former  method 
I  pay  y7  too  mjph. 

Interest  6  per  cent. 
Interest  at  6  per  cent.,  for  parts  of  a  year,  is  most  readily  computed  by  taking  parts  of  the 
rate,  thus — 

12  months  gives  6  per  cent.,  hence  2  months  gives  4,  of  6  per  cent.,  or  1  per  cent 
Two  months  is  called  sixty  days,  hence  for  every  sixty  days  we  may  take  1  per  cent,  of 
principal.  To  take  1  per  cent,  we  have  only  to  point  off  two  places  from  the  dollars  of 
principal,  and  consequently  we  have  always  the  interest  for  sixty  days  on  any  amount  at 
Bight.  Thus,  the  interest  for  sixty  days  on  n:{.1  12.24  is  §31.42  ;  and  again,  the  interest  for 
six  days  is  TV  of  the  amount  for  sixty  days,  or  $3.14 — so  we  have  always  the  interest  for  bix 
days  by  pointing  off  three  places  from  the  principal. 

Required  the  interest  of  $5,234.24  for  99  days  ? 


Solution. 

52,342     . 

.     Interest  for  60  davs 

£  of  60  days  26,171      . 

<< 

"    30     " 

5,234     . 

a 

"     6     " 

2,617     . 

u 

M      3     u 

86,364     . 

«« 

"    99     " 

Now,  as  we  have  always  the  interest  for  sixty  or  six  days  by  inspection  of  the  principal, 
we  can  make  from  these  any  amount  of  days,  thus — 24  days=4  times  6  days — for  120  days 
twice  60— and  for  22  days  £  of  60=20,  and  TV  of  20=2,  thus— 

3)5,234.24 

1,744.74         20 
174.47  2 


$19,19       Ans. 

Observe,  if  you  have  20  days,  and  want  2,  it  is  TV>  and  T'7  is  always  obtained  by  writing 
the  same  figures  one  place  further  to  the  right.  Much  practice  is  needed  to  become  expert 
in  this  proc 

As  this  computation  is  based  on  360  days  to  the  year,  it  is  of  course  J-  more  than  (i  per 
cent.,  bill  custom  appears  to  have  established  it,  although  we  think  it  should  be  restricted  to 
parts  of  one  month. 

For  months  and  days  interest  at  6  per  cent.,  the  months  are  computed  by  multiplying 
100th  of  the  principal  i>>  half  the  Dumber  of  months,  thus  : 

Required  the  Interest  for  5  months  7  day-;  at  <;  per  cent,  on  §8,854.29. 

Principal  +  100  =  88,5429 

24  half  number  of  months. 


77,0858 
19,27 


96,356      5  months, 
8,854      6  days, 

(i  I -J         ,'    of  »>  days. 


siiio.h,-,       Answer. 
74 


COMMERCIAL    ARITHMETIC. 

EXERCISE  I. 

Required  the  total  amount  of  interest  on  the  following  account  to  July  1st,  at  6  per  cent., 
in  days,  computing  360  days  to  the  year. 


Jany. 
u 

Feby. 


4th 
19" 

6" 

10" 

March    2d 

"       10th 

March  18th 

April      6 " 


May 

u 

June 

u 

July 


18" 
12" 
24" 
10" 
14" 
1st 


Amount* 

538.24 
1,342.29 

978.24 
1,432.50 

847.29 
1,236.84 

876.29 

576.23 
1,650.00 

765.00 
1,750.24 

978.29 
1,875.28 

157.89 


Days.       Interest. 
178  =  15.967 


Mo. 
5 


Days. 

27 


Interest. 
15.84 


EXERCISE  II. 

Compute  interest  on  the  above  for  months  and  days. 


INTEREST  AT  SEVEN  PER  CENT. 

Interest  at  7  per  cent,  must  be  computed  for  365   days  to  the   year,   hence  it  is  usual  to 
compute  first  6  per  cent.  360  days,  add  £,  and  deduct  ^,  thus : 

Required  the  interest  of  $538.24  for  178  days,  @  7  per  cent. 
Interest  of  $538.24  for  178  days  @  6  per  cent,  is         15,967 

i  2,661 


73 


18,628 
255 


18,373         Answer. 


But  this  operation  is  tedious,  and  is  much  more  easily  performed  thus : 

Short  method  of  computing  7  per  cent,  interest  for  days. 

Obtain  the  interest  at  6  per  cent.  <p  360  days  for  first  line  ;  write  the  same  figures  one 
place  to  the  right  underneath  for  second  line  ;  and  half  that  amount  for  third  line.  Write 
the  last  amount  tw<->  ^laces  to  the  right  for  fourth  line,  and  its  half  for  fifth  line.  The  sum 
of  t^-~~  t  terest  required. 


15.967 

1.5967 

7983 

79 

39 

Interest  at   6    per  ce 

u          a      i_    cc 

"        "   \°  of  do. 
"        "Ti7oflast 

"  '    "  i  ofTi7 

$18,3738 

Answer. 

75 


"■»x:t- 


SEC.  VII.- INTEREST. 

Note.  If  the  interest  at  6  per  cent.  ^  360  days  be  1,  the  interest  at  7  per  cent.  "$  365 
days  will  be  1,1507.  Hence  the  above  process  is  only  a  short  method  of  obtaining  the 
product  by  1,1507. 

INTEREST  AT  SEVEN  PER  CENT.  FOR  MONTHS  AND  DAYS. 

When  accounts  are  made  up  in  months  and  days  at  7  per  cent.,  the  months  are  computed 
as  12ths  of  a  year,  and  the  days  as  365ths. 

For  Months. — Compute  the  interest  for  a  year,  and  take  fractional  parts,  thus  : 

Required  the  interest  on  $538.24  @  7  per  cent,  for  5  mos.  27  days. 


538.24 
.07 


or  this  way  : 


2)37,676     Interest  1  year. 


37,67.68     Interest  for  1  year. 
5 


12)188,380 


l-.-:i- 
3,139 

$15,699 


"        6  mos. 
"        1  mo. 

"       5  mos. 


$15,698     Tsj  of  1  yr.  or  5  mos. 
Then  for  the  days  5,382 


60  days 


2,691 
269 

= 

30    " 
3    " 

2,422 
242 
121 

1 

27    "     6  per  cent. 

2,786 
15,698 

"     "     7  per  cent. 
5  months. 

$16,484 

Answer. 

The  computation  for  months  and  days  @  7  per  cent,  is  tedious,  and  it  is  not  uncommon  to 
compute  the  whole  at  6  per  cent.  360  days,  and  add  ^  ;  but  that  method,  so  far  as  days  are 
concerned,  gives  J»  too  much  interest.  It  is  therefore  usurious,  7  per  cent,  being  the  limited 
rate  in  this  state. 

Note.  To  compute  interest  or  per  centages  on  sterling,  or  any  foreign  currency,  first 
reduce  the  currency  to  a  decimal  expression,  and  then  proceed  as  with  dollars  and  cents. 

EXERCISE  I. 
Compute  the  interest  on  the  foregoing  account  in  days  @  7  per  cent. 

EXERCISE  II. 
Compute  the  interest  on  the  foregoing  account  in  months  and  days  @  7  per  cent. 


76 


SECTION     VIII 


EQUATION    OF    PAYMENTS 


The  object  to  be  attained  in  equating  payments  is  to  find   the   proper  time  for  paying  a 
whole  sum,  the  several  parts  of  which  are  due  at  different  dates.     For  example  : 
I  owe  $300,  which  is  due  as  follows 

$100  due  this  day, 
100     "    in  one  month, 
100     "    "  two  months. 


When  may  the  whole  be  paid  together  without  loss  of  interest  to  either  party  ? 

The  proper  time  is  an  intermediate  date,  when  the  interest  on  the  money  paid  after  it  is 
due  is  equal  to  the  interest  on  the  money  paid  before  it  is  due.*  In  this  case  it  is  obviously 
at  the  end  of  the  first  month,  for  on  that  day  I  pay  100  when  it  is  due,  100  a  month  before  it 
is  due,  and  100  a  month  after  it  is  due. 

We  now  compare  the  two  modes  of  settlement,  supposing  that  in  each  case  the  receiver 
put  out  his  money  at  interest. 

100  interest  2  months  1.00  300  interest  1  month  1.50 

100       "       1       "  50 

100       "       0       "  — 


300     Interest. 


1.50 


So  that  in  either  case  the  interest  by  the  time   the   last  payment  becomes  due   amounts  to 
$1.50. 

From  the  above  it  is  obvious,  that  to  find  an  equated  time  we  have  only  to  inquire  how 
long  it  will  take  the  sum  of  all  the  debts  to  produce  as  much  interest  as  the  several  debts 
would  produce  separately.     For  example  : 

I  owe  Jno.  King  as  follows — 

Jan.  10th        ....         $500.00 


"20           ....            850.00 

"25           ....            784.20 

Feb.  12           ....         1,650.00 

When  can  the  whole  be  paid  together  without  loss  of  interest  to  either 

party  ? 

Solution. 

Interest. 

Jan.  10         500.00,     from  Jan.  10  to  Feb.  12  =  33  days. 

2.75 

"    20         850.00,        "              20  "      "       "  =  23     " 

3.26 

"    25         784.20,        "              25  "     "      "  =  18     " 

2.35 

Feb.  12      1,650.00, 

$3,784.20 

$8.36 

j  *  ^'n1  accu,ra!;y  would  require,  when  the  payments  are  in  prospective,  that  the  interest  on  the  sums  paid  after  they  are 
due  shall  equal  the  present  worth  of  the  sums  paid  before  thev  are  duo  :  but  tv  *  computation  would  be  too  tedious,  and  the 
error  is  disregarded  in  practice. 

77 


COMMERCIAL    ARITHMETIC. 

Now,  the  intorr-st  on  the  sums  separately  would  on  the  12th  Feb.  amount  to  $8.30.  How 
long  will  it  take  13,784.20  to  give  $8.36  interest  ? 

Six  days  on  83,784  is        .         .       $3.7S4 
One  day .03 

$8.36  -f-  .63  =  13  days.  Hence,  as  we  find  13  days'  interest  on  $3,784.20  is  (8.36,  we 
have  only  to  date  13  days  hack  from  Feb.  12th,  which  gives  Jan.  30th  as  the  equated  time; 
we  therefore  deduce  the  following 

Rule. — Compute  the  interest  on  the  several  debts  to  the  last  date,  and  find  the  amount 
of  interest  on  all  the  debts.  Divide  this  amount  by  one  day's  interest  on  the  amount  of  debts, 
and  the  quotient  is  the  equated  time  to  count  back  from  last  date. 

It  very  commonly  happens  that  goods  are  sold  at  different  times  and  different  terms 
of  credit,  thus  : 

Jan.   10th,     at  2  mos.         .  .  1,500 

785 
1,750 

As  a  general  rule,  for  all  cases,  it  is  better  to  affix  to  each  amount  the  date  when  it  is  due 
in  cash  in  a  column  ruled  for  the  purpose.  Then  compute  from  these  dates,  instead  of  the 
date  of  the  sale. 


EQUATING    BY     PRODUCTS. 

Those  who  do  not  use  Interest  Tables,  and  are  not  very  expert  at  computing  interest,  will 
prefer  equating  by  products,  which  is  simply  multiplying  the  time  and  money  together,  then 
dividing  the  sum  of  the  products  by  the  sum  of  the  debts,  thus: 

Products. 
Jan.  10         500.00  X  33  =     .     .     .     16,500 


10th, 

at  2  mos 

18th, 

"   3     " 

21st, 

a    6      « 

Feb. 


10 

500.00  x 

33  = 

20 

850.00  X 

23  = 

25 

784.20  x 

18  = 

12 

1,650.00  x 
$3,784.20 

0 

19,550 
14,115 


)50,165(13  days  back  is 
37  84  Jan.  30. 


12,325 
11,352 


973 


COMPOUND     EQUATION    OF    PAYMENTS. 

The  object  of  a  compound  equation  is  to  find  when  the  balance  of  an  account  shall  take 
date,  so  as  to  cancel  the  balance  due  for  interest.  The  impression  made  upon  those 
unacquainted  with  practical  accounting  by  the  manner  in  which  the  subject  is  commonly 
treated,  \i/..  that  the  object  is  to  substitute  one  payment  in  prospective  for  Beveral  payments 
in  prospective,  is  entirely  erroneous  ;  in  perhaps  half  the  cases  to  which  equation  is  applied 
all  the  debts  arc  past  due.     How,  then,  it  will  be  asked,  can  we  pay  the  whole  at  the  average 

date  when  that  date  is  past  ?      The  idea  is  an  absurdity,  but  we  can  find  «  ben  the  Whole  shall 

take  date,  for  example:  1  have  sold  goods  for  John  Brown  100  different  times  through  the 

\  ear,  and  wish  to  find   \\  ben   |  ran  pass  to  his  credit  tin-  whole  amount  so  as  to  do  linn  JUSU06. 

The  time  will  obviously  be  sufficiently  back  to  give  as  muoh  interest  as  the  interest  on  the 

Ingly.      Suppose  ib,.  total  amount  sold    to  be  |2,000,  and  the  in' 
to  amount   to  .sjl)   more,    by  making   the   $2,(KI0   take   date    four   months    back,  1  do  what    is 

equivalent  to  passing  to  his  credit  §2,0 1'1.  w  hereai  If  I  p  ■         |2,0  10  to  his  credit  this  date, 
78 


SEC.   VIII.-EQUATION    OF    PAYMENTS. 

and  the  account  were  allowed  to  run  on,  I  should  be  giving  him  compound  interest,  which 
the  law  would  not  sustain.  The  student  must  therefore  learn  to  look  upon  dates  as  all- 
important,  and  the  altering  dates  back  or  forward  as  the  same  thing  with  giving  or  taking 
interest. 

Let  us  now  suppose  I  copy  from  my  Ledger  John  Brown's  account,  examining  all 
minutely,  and  dating  each  item  when  it  was  due  in  cash.  We  will  also  suppose  that  the 
day  on  which  we  do  this  is  25th  January,  and  we  propose  to  make  up  his  account  to  this 
date.  We  therefore  compute  the  interest  on  every  sum,  both  debit  and  credit,  up  to  this  date, 
and  insert  it  in  a  column  opposite  its  amount  and  number  of  days,  thus: 


CASE  I.     (Balance  dated  bachoard.) 
Dr.  John  Brown  in  account  current  with  Thomas  Jones.     (To  Jan.  25th.)  Cr. 


18481 

d'ys 

'«. 

rest  , 

1848 

d  ys 

in'..:- 

rest 

-  ■  -y 

Jan. 

1 

To  Merchandise 

24 

4 

00 

1,000 

00 

Jan. 

6 

By  Merchandise 

19 

6 

33 

2,000 

00 

u 

5 

«              a 

21) 

5 

00 

1,500 

>o 

(C 

8 

a 

17 

2 

83 

1,000 

00 

(C 

15 

a                  a 

10 

o 

00 

1,200 

i.l 

* 

Balances 

3 

34 

3,500 

00 

(( 

20 

a                   a 

5 

1 

50 

1,800 

00 

a 

25 

a                  u 

$ 

12 

50 

1,000 

00 

$ 

12 

50 

6,500 

6,500 

00 

Now  the  balance  due  for  interest  is  $3.34,  and  the  balance  due  on  the  account  is  83,500  ; 
the  question,  therefore,  is  how  far  back  must  we  date  $3,500  to  give  $3.34  interest.  One 
day's  interest  on  $3,500  is  $0,583,  and  this  is  contained  in  $3.34  5T7„\  times,  which  we  call 
six  days,  and  six  days  back  from  25th  Jan.  is  19th  Jan.,  the  date  required.  Insert  this  date 
then  opposite  the  balance,  and  5T7/o  days  in  the  column  of  days,  and  the  account  speaks  for 
itself,  as  no  other  date  would  make  the  interest  on  both  sides  balance. 

If  then  the  account  is  settled  25th  January,  John  Brown  must  pay  $3,503.34  ;  but  if  the 
account  runs  on,  then  the  new  account  is  charged  $3,500,  dated  19th  January. 


CASE  II. 

It  will   often   happen  that  the   balance  of  an  account  has   to  be   dated  forward.      For 
example  : 

John  Brown  owes  me  $1,000,  and  $10.00  in  addition  for 
out  his  account  I  buy  goods  from  him  amounting  to  $2,000 
January  25th,  stands  thus  : 


interest,  and  on  the  day  I  make 
the  account,  therefore,  this  day, 


Dr. 

Nov.  25. 


To  Merchandise 
2  mos.  int.  $10.00 


JOHN  BROWN. 
1,000  Jan.  25. 


Cr. 
By  Merchandise     .     2,000 


Now  I  obviously  owe  John  Brown  $1,000,  but  he  owes  me  interest  $10.00,  and  as  I  prefer 
holding  the  balance  to  receiving  the  $10.00,  it  is  evident  that  I  have  a  right  to  keep  the 
balance  due,  viz.  $1,000,  just  as  long  as  he  kept  my  $1,000,  viz.  two  months,  and  the 
balance  will  then  be  payable  two  months  forward,  or  March  25th.  The  account,  if  then 
made  out,  will  stand  thus  : 


Dr. 

Nov.  25. 

Mar.  25. 


To  Merchandise 
4  mos.  int.  $20.00 
To  Cash  Balance 


JOHN  BROWN. 
.     1,000         Jan.  25. 

.     1,000 


Cr. 
By  Merchandise     .     2,000 
2  mos.  int.  $20.00 


$2,000 


$2,000 


79 


SEC.  VIII.-COMPOUND  EQUATION  BY  PRODUCTS. 


It  will  now  be  perceived  that  there  are  two  cases,  the  one  requiring  the  balance  to  be 
dated  buck,  and  the  other  requiring  it  to  be  held  over;  the  ground  on  which  they  differ  being 
that  in  the  "iii  the  balance  of  interest  and  balance  of  account  are  either  both  payable  or  both 
receivable,  that  is,  they  are  both  on  the  same  side  of  the  account  ;  but  in  the  other  case,  they 
are  on  opposite  sides  of  the  account,  that  is.  the  balance  is  to  be  received,  while  the  balance 
of  interest  is  to  be  paid,  or  vice  versa.  To  exemplify  still  more  fully  we  give  the  following 
account,  where  the  balance  is  dated  forward. 


Dr. 


CASE  II.     (Balance  dated  forward.) 
John  Brown  in  account  current  with  Thomas  Jones. 


(To  Jan.  25th.)    Cr. 


1-1- 

i 

1M-1H 

Jan. 

1 

To  Merchandise 

24 

4 

on 

1,000  00 

Dec. 

7 

By  Merchandise 

10 

16 

S3 

2,000 

00 

« 

5 

((                   u 

20 

5 

on 

1,500  00 

1849 

(i 

15 

.<<                     H 

10 

2 

00 

1,200(00 

Jan. 

8 

((                      u 

17 

2 

83 

1,000  (Ml 

c< 

•jo 

<«                     CI 

5 

1 

50 

l,800]00 

"   Bal.  of  Acct. 

3,500 

00 

tt 

25 

K                 (t 

1,000 

(id 

"    Bal.  of  Int. 
To  Balance 

$ 

o 

19 

1  — 

r 

66 
16 

By  Interest 

$ 

19 

16 

6,500 

00 

6,500 

00 

3,500 

6  66 

Here  it  appears  John  Brown  owes  me  $3,500,  but  I  owe  him  $6.66  interest.  Now  it  is 
evident  that  he  may  hold  back  this  $3,500  until  the  interest  comes  to  $6.66  ;  then  $6.66  -f- 
.583,  or  one  day's  interest,  gives  11.4  days,  and  eleven  days  forward  from  25th  Jan.  gives 
Feb.  5th,  the  date  required.  If  John  Brown  settles  the  account  25th  Jan.  he  pays  $3,500, 
less  $6.66,  but  if  he  takes  the  equated  time  he  pays  $3,500,  Feb.  5th.  From  the  foregoing 
we  therefore  deduce  the  following  rule  for  finding  when  the  balance  of  an  account  takes 
date  : 

Rule. — Compute  the  interest  on  both  sides  to  the  day  of  making  up  the  account. 

Insert  the  balance  of  interest  and  balance  of  account,  making  all  the  columns  balance. 

Divide  the  balance  of  interest  by  one  day's  interest  on  the  balance  of  account,  and  the 
quotient  is  the  number  of  days  to  be  counted  back  or  forward. 

If  the  balances  of  interest  and  amounts  are  on  the  same  side  of  the  account  count 
backward,  if  otherwise  count  forward. 

COMPOUND  EQUATION  BY  PRODUCTS. 

The  process  is  merely  substituting  the  product  of  the  money  and  time  for  the  interest,  as 
before  exemplified,  and  dividing  the  balance  of  products  by  the  balance  of  the  account.  The 
quotient  is  the  equated  time.     Thus  : 

Dr.  John  Brown  in  account  current  with  Thomas  Jones.  Cr. 


]-l- 

1-ls 

Jan. 

I 

To  Merchdise. 

24 

24,000 

1.000 

00 

Jan. 

(i 

By  Cash 

L9 

38,000 

•.•.000 

00 

u 

5 

<« 

<( 

20 

80,000 

1.500 

00 

* 

■i      K 

17 

17.000 

1.000 

1)11 

U 

15 

a 

<< 

10 

12,000 

1,200  00 

"     Balances 

•Jli. (Kill 

3,500 

11(1 

"     . 

20 

<< 

u 

5 

9,000 

1,800 

00 

20,000+3,500= 

" 

■i:> 

u 

c< 

* 

1.000 

0(1 

•V,r„  days 

Or  8 davs  hack  = 
Jan.'  19th 

1 

75,000 

0,50(1 

00 

75,000 

6,500 

(1(1 

"~l 

If  the  balance  of  products  and  bal  mice  ofthe  account  arc  Oil  different  Bidea  count  forward. 
80 


SEC.  VIII.-EQUATION  OF   PAYMENTS. 

EXERCISES. 

1.  The  Debit  side  of  an  account  made  up  to  July  1st  is  $2,500,  interest  $24.62,  the 
Credit  side  $3,200,  interest  $29.38,  when  shall  the  balance  take  date  ? 

2.  I  have  sold  goods  for  John  Doe,  amounting  ^  Sales  Book  to  $5,843.22.  The  interest 
computed  on  each  sale  to  January  1st  is  $150.24.  The  expenses  chargeable  on  said  goods 
for  duties,  freight,  commission,  labour,  &c,  are  $856.24 ;  and  interest  to  date  January  1st 
$39.56.     When  do  the  net  proceeds  take  date  ? 

3.  Sold  Richard  Roe  the  following  merchandise:  Jan.  10th  at  3  mos.  $1,350;  Jan.  15th 
at  4  mos.  $1,875.20  ;  Jan.  14th  at  3  mos.  $1,824.  He  calls  to  settle  Jan.  20th,  and  pays 
in  cash  $500,  and  gives  his  note  for  the  balance.     When  must  that  note  fall  due  ? 

Note.  It  will  often  happen  in  equating  an  Account  Sales  that  the  whole  can  be  reduced  to 
a  simple  equation  by  cancelling  from  the  sales  enough  to  cover  the  charges,  where  there 
happens  to  be  a  sale  on  same  date  that  the  charges  are  due. 


11 


81 


SECTION     IX 


DISCOUNT. 


If  we  pay  a  debt  a  year  before  it  is  due  we  ought,  in  strict  equity,  to  pay  a  sum  which, 
with  a  year's  interest  added,  will  amount  to  the  debt.  For  example:  we  owe  $106,  due  in 
one  year  from  this  time,  interest  at  6  per  cent.  Now  it  is  obvious  that  $100  paid  now 
discharges  the  whole  debt,  for  that  $100  placed  at  interest  one  year  amounts  to  $106.  The 
present  worth  then  is  ■]-££  of  the  debt  for  a  year  at  6  per  cent.,  for  half  a  year  ■{-£$,  or  for  two 
months  }£f ,  and  so  on. 

Then  the  present  worth  of  $100  due  a  year  hence  at  6  per  cent,  is  not  $94,  for  that  would 
be  making  the  present  worth  J^-  of  the  debt,  whereas  it  is  }££,  or  $94.34,  which  with  6 
per  cent,  added,  gives  $100.  To  find  the  present  worth,  then,  of  a  sum  due  at  a  future  time 
we  adopt  the  following 

Rule.  Divide  the  debt  by  $l,-plus  tfie  interest  of  $1  for  the  time,  and  the  quotient  is  the 
present  worth. 

•The  correctness  of  this  rule  may  be  thus  demonstrated  :  Suppose  we  require  the  present 
worth  of  $1,000,  due  in  one  year  at  6  per  cent.  Now  we  have  in  hand  $1,000,  from  which 
we  lay  down  $1  as  present  worth,  and  apart  we  set  down  .06  (six  cents)  as  interest  of  the 
same  for  one  year;  it  is  obvious  that  the  $1  discharges  $1.06  of  the  debt.  Now  we  lav 
down  another  dollar  as  principal,  and  six  cents  as  interest,  and  so  proceed  until  we  have  told 
out  the  whole  ;  we  shall  then  have  the  money  divided  into  two  parts — the  one  being  discount, 
the  other  the  present  worth — and  the  present  worth  is  obviously  $1  for  every  $1.06  we 
counted  out,  and  ,0T°o0<r00  =  $943.40. 

As  it  is  somewhat  tedious  to  find  the  interest  of  $1  for  a  fraction  of  a  year  we  subjoin  the 
following  : 

Interest  of  $1  @  6  per  cent,  one  mo.  .005,  one  day  .0001§ 

"        "    "     "  7   "       "       "      "     .OOof,  "      «     .00019178 

« 

To  find  the  divisor  for  months  multiply  the  expression  for  one  month  by  the  number  of 
months  required,  and  add  $1.  If  days  are  wanted  multiply  the  expression  for  days.  For 
example,  what  is  the  divisor  for  3  mos.  24  days,  7  per  cent.  ? 

.005$  x     3     =     17£  or  .0175 
.00019178    x  24     =  .0046 

Then  add  1.00 


Divisor  $1.0221 


Discount  should  always  be  proved  by  computing  interest  on  the  present  worth,  and  thus 
answcriiii.'  tin-  conditions  by  producing  the  debt.  F6*r  example,  required  the  present  worth 
of  $7,315.24  for  3  mos.  24  days  7  per  oent.  : 

B 15. 24 -Ml. 0221        17,157.07  present  worth. 
Proof.     87,157.06  (a  0  percent.  9  mos.  24  days       H58  L8  +  17,157.06  =  $7,315.24. 

82 


SEC.  IX-DISCOUNT. 

QUESTIONS. 


1. 

2. 
3. 
4. 
5. 

Required  the  discount  of             $556.61 
"           "    present  worth  of  1,380.77 
«           «         "           "       «    1,471.65 
«           «         "           «       "    1,263.41 
«           «                     «       «       891.48 

178  days               7  per  cent 

5  mo.  22  days  6    "       " 

4  "     21     "      7    "       " 

112     «      7    «      " 

104     " .    6    «       " 

6. 

«         «           «       "    1,761.32 

38     ."      6    "       " 

83 


^~— 


SECTION    X 


ACCOUNTS     CURRENT 


An  Account  Current  is  a  statement  of  all  transactions  for  and  against  some  firm  or 
individual  with  whom  we  have  had  dealings  ;  it  is  similar  to  the  Ledger  account  in  its 
general  features,  but  not  a  copy  of  it.  The  account  in  the  Ledger  should  rather  be  looked 
upon  as  an  index,  by  which  we  may  find  all  particulars  for  the  Account  Current.  Each 
item  of  debit  and  credit  on  the  Ledger  must  be  traced  back  to  its  original  source,  whether 
the  Journal  or  elsewhere,  so  that  it  may  not  only  be  clearly  and  fully  described,  but  that  the 
true  date  may  be  also  affixed.  The  date  on  the  Ledger  is  the  date  when  the  transaction  took 
place,  but  the  day  when  it  takes  date  in  account  is  the  day  when  the  item  is  due  in  cash. 
For  example  :  I  may  on  the  10th  Jan.  buy  goods  from  Jno.  Brown  at  two  months'  credit, 
§1,000,  which  would  be  dated  on  the  Ledger  10th  Jan.,  but  in  Account  Current  the  ite^n 
would  take  date  10th  March.  Hence  the  first  point  is  to  ascertain  carefully  when  each  item 
takes  date.  Then  a  full  explanation  must  be  given  to  each  item,  instead  of  "  To  Sundries," 
"  To  Bills  Payable,"  &c.     Such  phrases  appear  ridiculous  in  an  Account  Current. 


James  Morrison  in  Account  Current  and 


Db. 


1849 

Jan. 

10 

<( 

15 

u 

7 

Feb. 

24 

Mar. 

12 

«( 

20 

<< 

29 

June 

21 

To  our  acceptance  of  your  draft  at  2 
months,  due  March  13th 

To  Merchandise  at  3  months'  credit,  due 
April  18th 

To  Brown  &  Co.'s  acceptance,  our  draft 
at  3  months,  due  April  10th   .... 

To  our  note  at  2  months,  your  favour  due 
April  27th 

To  your  order  jn  favourof  James  Thomp- 
son        

To  Cash 

To  Net  Proceeds  Consignment  ^  "Jane," 
|  )  Account  Sales 

To  Interest 

To  Balance  to  new  account 


Days. 

100 

G4 

72 

55 

101 
93 

84 


Interest. 


9 
19 
28 

7 

12 

8 

67 


66 

97 

08 

97 

36 
92 

6Q 


1,873 

2,340 

870 

735 
576 

1,889 

154 

1 

811,962 


00 

00 

00 

00 

00 
00 

79 
61 
49 

89 


84 


SEC.  X -ACCOUNTS  CURRENT. 

FOREIGN     ACCOUNTS. 

Foreign  Invoices  are  stated  in  the  currency  of  the  country  they  leave, — for  example :  a 
London  invoice  would  be  made  out  in  pounds,  shillings,  and  pence  ;  but,  having  contracted 
a  debt  payable  in  London  in  pounds,  shillings,  and  pence,  it  is  necessary  to  record  that  debt 
in  dollars  and  cents  on  our  own  books.  The  course  we  recommend  is  to  record  on  our  books 
for  every  foreign  debt  the  amount  of  dollars  and  cents  that  will  then  liquidate  that  debt 
without  regard  to  any  par  of  exchange.  The  object  of  recording  the  debt  in  dollars  is 
merely  to  show  our  indebtedness  as  nearly  as  circumstances  admit  of.  When  we  come  to 
settle  with  the  parties,  we  restore  the  pounds  to  the  account  current  ;  that  is,  if  we  owe  £1 
in  London,  and  have  recorded  the  debt  at  $4.79,  it  does  not  follow  that  $4.79  discharges 
that  debt ;  we  must  send  £l  to  pay  it,  although  that  pound  may  cost  us  $5.  A  debt  must 
always  be  paid  in  the  currency  of  the  country  where  it  is  contracted.  I  may  owe  John  Doe 
for  goods  sold  here  on  his  account  $5,000 — that  debt  is  due  in  dollars.  John  Doe  may  at 
the  same  time  owe  me  for  goods  he  sold  for  me  in  London  £1,041  13s.  4d.,  which  I  recorded 
in  my  books  $5,000,  and  his  account  stands  thus : 


John  Doe. 


To  Sundries  .....     $5,000 
(proceeds  of  my  goods.) 


By  Sundries $5,000 

(proceeds  of  his  goods.) 


but  this  account  is  not  settled,  although  it  appears  to  balance.  Since  the  time  my  goods  were 
sold,  or  rather  since  the  time  I  charged  him  with  $5,000,  which  I  thought  equivalent  to 
£1,041  13s.  4d.,  exchange  may  have  risen,  and  I  may  now  be  able  to  sell  a  bill  of  that  amount 
for  $5,064.28.  In  making  up  foreign  accounts  current,  therefore,  it  is  necessary  to  have  on 
each  side  two  money  columns,  one  for  dollars  and  cents,  and  the  other  for  foreign  currency, 
and  all  debts  that  have  been  turned  into  dollars  must  be  restored  to  their  original  form. 
Then,  if  John  Doe  owes  pounds,  he  is  charged  pounds  in  the  account  current  ;  and  if  we 
owe  him  pounds,  we  credit  him  pounds,  paying  no  regard  to  the  dollars  on  our  Ledger.  The 
balance  of  the  columns  of  pounds  would  then  be  payable  or  receivable  in  London,  and  the 
balance  of  the  columns  of  dollars  would  be  payable  or  receivable  in  New  York.     The  first 


Interest  Account  with  Jones  &  Co. 


Cr. 


1848 

Dec. 

10 

1849 

Jan. 

2 

u 

8 

Feb. 

15 

Mar. 

21 

tt 

24 

June 

21 

Balance  of  former  account  due  this  date  . 

By  Invoice  of  goods  at  2  months'  credit, 

due  March  5th 

By  our  draft  on  you  in  favour  of  Allen  & 

Co.,  at  60  days,  due  March  12th      .     . 

By  Check  on  Phoenix  Bank 

By  Wilson   &  Co.'s   acceptance  in  your 

favour  at  30  days,  due  April  23d  .  . 
By  your  Note  at   30  days  to  our  order, 

due  April  26th 

By  Interest 

Errors  excepted, 

Jones  &  Co. 


New  York,  June  21st,  1849. 


Bays. 


Interest. 


193        43      42 


108 

101 
126 

59 

56 


42 

29 
20 

49 

3 


27 

11 

49 

15 

45 


1,350 


2,349 

1,730 
976 

5,000 

370 

187 


$11,962 


00 


00 

00 
00 

00 

00 

89 


89 


85 


SEC.  X.-ACCOUNTS  CURRENT. 

is  technically  called  "  Our  Account"  the  latter  "His  Account;"  that  is,  our  account  with 
him  in  London,  and  his  account  with  us  in  New  York. 


Dr. 


John  Doe  in  account  current  with  Thomas  Jones. 


Cr. 


To  Net  proceeds  of  my  goods  sold  by 
"  Cotton  shipped   by  me   to   your 

By  Net   proceeds  of  your  goods  sold 
"    >  our   Invoice  of  goods  shipped  to 

"    H -il.-ince  due  me  payable  in   Lon- 
"   Balance  due  me  payable  in  New 

£1,234  18s.  6d.    $3,500.00 

jt'1,-234  lHs.  6d.   $3,500.00 

To  Balance  due  In  London    .    .    .    £1,110  0s.  8d. 
"        "             "            "           ...                                     500.00 

Now,  the  value  in  dollars  of  the  balance  due  me  in  London  depends  upon  the  present  rate 
of  Exchange. 

The  above  is  not  given  in  exact  mercantile  phrase,  as  the  object  was  to  explain  the  nature 
of  the  account  as  clearly  as  possible. 


PAR    OF    EXCHANGE 


Par  signifies  the  expression  of  an  equivalent  between  two  different  currencies.  For 
example :  the  quantity  of  fine  gold  contained  in  a  sovereign  is  fai  nearlv  of  that  contained 
in  a  half  eagle,  consequently  the  sovereign  is  worth  $4.87,  which  is  the  true  par. 

Exchange  on  London,  however,  is  quoted  on  a  merely  nominal  par  ;  that  is,  the  dollar  is 
assumed  to  be  equal  to  4s.  6d.  sterling,  and  when  exchange  is  quoted  at  $1.08,  or  $1. 09$, 
&c,  it  means  so  much  per  unit  of  4s.  6d.,  and  is  called  8  per  cent,  or  9£  per  cent,  premium, 
whereas  in  reality  exchange  is  at  par  when  quoted  at  9£  per  cent,  premium.  For  example  : 
4s.  6d.,  or  nine  sixpences,  costs  .$1,095,  and  as  forty  sixpences  make  £l,  we  must  pay  for 
the  pound  V  of  $1,090,  or  $4.87  nearly. 

The  rate  of  exchange  between  two  places  is  regarded  as  indicating  from  which  of  the  two 
the  balance  of  trade  is  due.  If  exchange  on  London  is  above  par,  it  indicates  that  this  country 
lias  imported  more  than  it  exported,  and  lias  to  pay  the  balance  in  specie  ;  if  at  par,  the  imports 
and  exports  are  regarded  as  equal  ;  and  if  below  par,  it  is  inferred  that  the  exports  have  been 
greater  than  the  imports,  and  that  the  balance  is  to  be  received  here  in  specie.  This  may 
be  illustrated  as  follows: 


Dr. 


Lonoon  in  Account  Current  with  New  York. 


Cr. 


Due  New  York  Cotton  Merchants  Due  London  Merchants  from  the 

for  cotton  shipped    .         .         .     130,000         New  York  Importers       .  .    50,000 

Balance  of  trade  due  New  York  .    80,000 


£130,000 


£130,000 


Here  London  owes  New  York  £130,000,  and  New  York  owes  London  £50,000.  Hence 
it'  London  shipped  £180,000  in  specie  to  pay  her  debt,  New  York  must  ship  £.".0,000  of  it 
back,  which  would  be  an  obvioiM  loss  of  freight*  insurance,  and  inn-rest,  h  would  be  much 
easier  to  order  the  parties  in  London  who  held  the  proceeds  of  cotton  to  pay  over  the 
£50,000  to  the  creditors  of  the  import,. rs,  and  thus  savo  its  transit  hack  and  forth."  We  give 
86 


SEC.  X.-FOREIGN  ACCOUNTS. 

an  individual  example  of  the  way  this  is  effected.  A.,  one  of  the  cotton  merchants,  has 
£5,000  due  him  in  London  in  the  hands  of  Y.,  and  B.,  an  importer,  owes  Z.,  in  London, 
£5,000.  Hence  A.  wants  to  bring  money  from  London,  whilst  B.  wants  to  send  it  there. 
Now  a  broker  brings  A.  and  B.  together  to  effect  this  arrangement.  A.  pays  B.  the 
equivalent  of  £5,000,  for  which  A.  gives  him  an  order  on  Y.  in  London.  B.  then  incloses 
this  order  on  Y.,  and  sends  it  to  Z.  to  pay  his  debt,  so  Z.  goes  to  Y.  in  London,  presents  A.'s 
order,  and  receives  his  money  due  from  B.,  and  Y.,  instead  of  shipping  £5,000,  has  only  to 
pay  it  over  to  Z.  This  order,  then,  is  the  document  called  a  Bill  of  Exchange,  and  is  written 
thus  : 

BILL  OF  EXCHANGE. 
£5,000  0s.  Od.  New  York,  January  1st,  1849. 

At  sixty  days'  sight  of  this  my  first  of  Exchange  (second  and  third  unpaid*),  pay  to  the 
order  of  B.  five  thousand  pounds,  for  value  received. 

To  Y.,  A. 

Merchant, 
London. 

It  may  assist  the  uninitiated  to  take  the  following  view  of  the  operation  of  a  Bill  of 
Exchange.  If  he  has  £1,000  to  receive  from  A.,  in  London,  and  £1,000  to  pay  to  B.,  in 
London,  he  has  only  to  order  A.  to  pay  B.  Now  when  he  buys  a  bill  it  is  only  because  he 
has  no  debtor  in  London,  and  therefore  in  buying  a  bill  he  buvs  a  debt  from  some  one  else. 

Now  assuming  that  the  account  between  London  and  New  York  stood  as  exemplified,  the 
cotton  merchants,  or  sellers  of  bills,  would  be  in  the  market  with  £130,000,  and  the  buyers, 
or  importers,  would  want  but  £50,000.  Thus  the  supply  being  greater  than  the  demand, 
the  price  of  bills  must  fall  below  par;  the  cotton  merchant  would  rather  sell  his  bill  at  1J 
or  2  per  cent,  below  par  than  import  the  specie  at  the  cost  of  24.  per  cent.,  and  thus  the  price 
must  fall,  until  the  cotton  merchants  prefer  importing  specie,  and  when  they  have  imported 
the  whole  balance  due  the  rate  must  again  rise  to  par.  It  can  remain  at  par  only  as  long  as 
the  supply  of  bills  is  equal  to  the  demand,  and  when  the  supply  becomes  less,  then  it  rises 
above  par. 

These  must  be  regarded  only  as  the  general  laws  which  govern  the  subject  of  foreign 
exchange,  when  drawing  and  remitting  are  confined  to  the  legitimate  purposes  of  commerce. 
Bills  of  Exchange  are,  however,  like  stocks,  frequently  speculated  upon  ;  and  thus  the 
market  may  rise  or  fall  without  affording  any  positive  evidence  of  the  state  of  the  balance  of 
trade  ;  even  a  general  want  of  confidence  may  cause  bills  to  fall.  For  example  :  I  may  owe 
£1,000  in  London  when  bills  are  selling  at  $4.70  <p  £,  by  which  means  I  could  pay  the 
debt  with  $4,700,  but  I  may  prefer  shipping  specie,  although  it  may  cost  me  $4.93  ^  £, 
making  $4,930.  In  buying  a  bill  I  run  the  risk  of  its  being  dishonoured,  while  in  shipping 
specie  I  am  secure  from  loss.  In  times  of  great  distrust  this  feeling  may  put  bills  below  par, 
when  the  balance  of  trade  is  against  us. 

EXCHANGE    ON     LONDON 

is  quoted  at  so  much  per  unit  of  4s.  6d.  sterling.  For  example  :  when  quoted  at  $1.08  it 
means  $1.08  for  4s.  6d.,  and  as  $1.00  is  called  the  par,  $1.08  is  8  per  cent,  premium. 

To  reduce  pounds,  shillings,  and  pence  to  a  decimal  expression. 
Reduce  £584  lis.  lO^d.  to  a  decimal  expression. 

Operation.  £584. 

10s.  is  T%  or     i     =  .5       hence  for  the  shillings  take  |  for  1st  decimal, 

Is.  is  §Jg  or  Tf7  =  .050  for  an  odd  shilling  count  50  for  next  decimal,  or  xl^, 

10*  i*  jrVV  or  T4|T  =  .043 


£584.593 


The  pence  and  farthings  are  first  reduced  to  farthings,  making  41.     Now  if  100  farthings 
made  £1,  the  decimal  expression  would  be  .041,  but  960  make  £l,  and  therefore  ^VV  make 

87 


SEC.  X -FOREIGN  ACCOUNTS. 

-j.-j.3-jj..     The  correction  can  always  be  made  near  enough  by  adding  1  when  the  farthings  are 
over  12,  and  2  when  over  36.      We  therefore  proceed  by  the  following 

Rile.  Take  half  the  shillings,  if  any,  for  first  decimal,  and  if  an  odd  shilling  remains 
carrv  50;  if  no  shillings,  write  0.  Then  reduce  pence  and  farthings  to  farthings,  adding  1 
when  12  or  over,  2  when  36  or  over  ;  to  which  add  your  50  carried,  and  set  down  the  whole 
following  first  decimal.  Thus  for  no  shillings,  31  farthings,  write  .032.  The  whole  should 
be  done  by  inspection,  without  making  any  more  figures  than  the  decimals  required.* 

EXERCISES. 
"Write  the  following  as  pounds  and  decimal  fractions : 

£      s.      d. 
432   13     9£ 

12  0     8 

13  18  7£ 
122  10  ol 
960  3  6} 
124  17  ll| 
230  1  5 
126  16  9£ 

13     4| 
H 


£2,023  16     5j 


£2,023.823 


To  convert  pounds  into  dollars  at  par. 
£1    is   y   of  a  dollar,  therefore  multiply  the  pounds  by   y.f     For   example:    reduce 
£184  10s.  9£d.  to  dollars  at  par. 

Operation.  $184,539 
40 


9)7381.560 


.173     Answer. 


To  convert  dollars  into  pounds  at  par. 
The  dollar  is  -ft  of  a  pound,  therefore  multiply  the  dollars  by  ^s.     For  example  :  reduce 
$820.17  to  pounds  sterling  at  par. 

Operation.       $820.17 
9 


4.0)738,153 

184,5382 
20 

10,7640 
12 

9,1680 
4 


.6720        Am.  £184  10 


•  Thr  Mtbm  doe*  not  ri»Uu  Hi w  u  new  ;  it  is  to  ba  ruiin.i  iii  Mverel  BnglUh  uithiMtlea.    Hi  doet  not  bum  wha  u  entitled 
tn  endll  Aw  it. 

t    V.'licn  M  l'fi-i-  t  l/»r)iMii  lur  ;i  DOltlpllal  u  i-  ulu  i\s  undent I  lint  IN  IN  t"  iniiUi|'l)'  I'V  t)i>'   nuiiiiTiilor,   tmj  divide    by 

the  dennimnutiir. 

88 


SEC.  X -FOREIGN  ACCOUNTS. 

To  convert  pounds  into  dollars  at  a  premium  or  discount. 
Example. — What  will  £184  10s.  9£d.  amount  to  when  exchange  on  London  is  8|  premium  ? 
The  price  paid  for  4s.  6d.  Sterling  at  par  is  1  dollar,  at  8$  per  cent,  premium  it  is  1.08|. 

In  dollars  at  par  as  above    ....     $820,173 
Price  paid  for  4s.  6d 108$ 

6561384 
820173 

41008   |  of  82017 
20504   -A  of  last 


Ans.      $891,938 


Rule. — Reduce  the  pounds  to  dollars  at  par,  and  multiply  by  the  price  paid  for  4s.  6d. 

To  convert  dollars  into  pounds  at  a  premium. 
Example. — What    amount   of    Exchange    can    I    buy  on    London   for    $891.94,   at   8| 
premium  ? 

4s.  6d.  sterling,  if  bought  at  par,  would  cost  $1.00,  but  I  am  to  give  $1.08f  for  4s.  6d  ; 
therefore  how  many  times  is  $1.08$  contained  in  $891.94,  for  just  so  many  times  can  I  buy 
4s.  6d. 

1,0875)  891.9400  (820,174  times  4s.  6d. 

87000  9 


.21940 
21750 

40)738,1566 

Ans. 

£184  10s. 

184,5391 
20 

.  .19000 
10875 

10,7820 
12 

Q*d 

.81250 
76125 

9,3840 
4 

•51250 

43500 

1,5360 
Rule. — Divide  the  dollars  by  the  price  of  4s.  6d.,  and  multiply  the  quotient  by  T9^. 
It  is  very  usual  to  sell  imported  goods  by  the  pound  sterling,  for  example — 
I  import  goods  the  invoice  of  which  amounts  to  £470  14s.  Od. 

Exchange  9  per  cent,  premium,  which  in  dollars  is     .  $2,280.28 

I  pay  here  for  duties  and  other  charges    .' 527.55 

Making  their  total  cost $2,807.83 

How  much  do  I  pay  in  dollars  for  an  article  charged  in  the  invoice  £l  ?     How  much 
for  one  shilling  ? 

Operation.— 470.7)  2807.830  (5.96 
23535 


•45433 
42363 

20)5.96 
.298 

•30700 

28242 

pound  $5.96,  "$  shilling 
12 

30  cts. 

Ans. 

89 


■M 


SEC.  X.-FOREIGN  ACCOUNTS. 

Rule. — Convert  the  pounds  into  dollars  at  the  ourrenl  rate  of  exchange,  and  add  expenses 
on  this  sid*'.     Then  divide  by  ihe  Dumber  of  pounds  for  the  price  per  pound,  and  that  I 
for  the  price  per  shilling. 

EXCHANGE     ON     FRANCE 

is  quoted  as  so  many  francs  and  centimes  (r,'lT)  for  the  dollar  of  the  United  States.  This 
quotation  is  apt  to  perplex  the  uninitiated  when  they  hear  that  exchange  on  Havre  has  gone 
down  from  85.27  to  85.29,  but  a  moment's  reflection  will  show  that  the  more  francs  we  get 
for  a  dollar  the  cheaper  or  lower  is  the  rate  of  exchange.  On  London  the  pound  is  the 
certain  and  the  dollar  the  variable  money;  but  on  France  the  dollar  is  the  certain  and  the 
franc  the  variable. 

The  intrinsic  par  of  exchange  on  France  is  5,34535  francs  for  one  dollar,  silver  for  silver, 
but  the  commercial  par  is  nearer  f.5,2625,  that  being  the  amount  an  United  States  dollar  will 
pay  in  France,  in  consequence  of  a  seignorage  oi    1'.  percent,  being  charged   for  coil 
The  par,  however,  is  disregarded  in  keeping  accounts,  as  the  quotations  are  so  many  francs 
for  the  dollar,  and  not  as  on  London,  so  much  per  cent,  above  or  below  par. 

To  convert  francs  to  dollars. 
Example. — How  many  dollars  must  I  pay  for  a  bill  on  France  for  5824,32  francs  when 
Exchange  is  f  5.28J  ? 

f.5.284,  cost  one  dollar — then   how  many  times  f.5.284,   in  5824.32  ?  for  so  many  times 
must  1  pay  one  dollar. 

5.2825)  5824.3200  (1102.568  Ans. 
Rule. — Divide  by  the  number  of  francs  per  dollar. 

To  convert  dollars  into  francs. 
Example. — In  $1,102.56  how  many  francs  and  centimes  at  f.5.28| — one  dollar  is  f5.28£. 
1102.568  is  so  many  times  5.284;,  thus  :  • 

1102.568 
5.28J 

Ans.  f.5824,31546 
Rule. — Multiply  the  dollars  by  the  rate  in  francs. 

EXCHANGE    ON     HAMBURG 

is  quoted  as  so  many  cents  per  Marc  Banco,  worth  intrinsically  35  f-*tf-0  cents.  The 
denominations  of  money  in  Hamburg  are  the  Marc  Banco  of  16  schillings,  and  the  schilling 
is  divided  into  12  pfennings. 

To  convert  Marcs  Banco  into  dollars  of  United  States. 
EXAMPLE. — A  of  Hamburg   semis   me   imods   amounting   ji   Invoice  to  (i,123m.  12s.  lOpf. 
when  exchange  is  at  84  oents  per  Marc  Banoo.     What  amount  of  dollars  shall  I  pass  to  his 
credit  ? 

*-J#)l0.00    pfennii 


16)12.833  decimal  parts  of  schillings. 


6. 123,802  marcs  banco. 
84 


24405208 
1881 1  106 

Am.     82082.09268 


•  Tin-  •.in. i. hi  wh  ten  ih.u  i..  i,  i  require  to  have  Itali  pro©  I     0,193m,  l'.v  lOpfl 

Pint  we  take  10  pfenning,  which  U  lO-lSthi  ol  ...  riien  we  prolix  I'Js..  whirl 

■chllllngi,  which,  divided  li  r  the  decimal  expression  <bi     ISsch.  lOpI     Then  we  preflx  0,1 

we  have  the  ■  hole  In  ■  di  i  Im  tl  •  in<  a 

ill) 


SEC.  X.-FOREIGN  ACCOUNTS. 

Rule. — Reduce  the  schillings  and  pfennings  to  a  decimal  expression  of  Marcs  Banco,  and 
multiply  by  the  price  cp  Marc  Banco. 

To  convert  dollars  into  Marcs  Banco. 

Example. — What    amount   of  exchange   at   34   cents   ^  Marc   Banco   can    I    buy    for 
$2,082.09. 

Solution.— .34)  2082,09268  (6123,802 

16 


12,802 
12 


9.624 
Ans.  6,123m.   12s.   lOpf. 

Rule. — Divide  the  dollars  by  the  price  Sp  Marc  Banco. 

EXCHANGE    ON     AMSTERDAM 

is  quoted  at  so  many  cents  per  Florin,  the  Florin  being  divided  into  100  cents.     Par  value 
of  the  Florin  in  United  States  money  40  cents. 

To  convert  Florins  into  Dollars. 

Example. — A.  of  Amsterdam  sends  me  an  invoice  of  goods  amounting  to  8,716-,^  Florins. 
What  amount  must  I  pass  to  his  credit  on  my  Ledger  when  Exchange  is  41;jcts.  <p  Florin  ? 

8,716.34 
.4H 


Ans.     $3595,4902 

Rule. — Multiply  the  Florins  by  the  price  ^  Florin. 

To  convert  Dollars  into  Florins. 
Example. — How  many  Florins  can  I  buy  for  $3,595.49,  Exchange  at  41£  ? 

.4125)  3,595.49  (8,716.34     Ans. 
Rule. — Divide  the  dollars  by  the  price  ^  Florin. 

EXCHANGE    ON    BREMEN 

is  quoted  at  so  much  ^  Rixdollar  (par  value  80  cents) ;  the  Rixdollar  is  72  grotes,   and 
1  grote  =  5  swares. 

To  convert  Rixdollars  of  Bremen  into  United  States  dollars. 

Example. — What  will  it  cost  me  for  a  draft  on  Bremen  for  4,324  Rixdollars,  68  grotes, 
4  swares,  Exchange  at  78£  cents  <p  Rixdollar  ? 

91 


1KB* 


SEC.  X.-FOREIGN  ACCOUNTS. 

Operation. — f)  4.0 
72)68.8 


4324.955 
.78* 


Ans.     $8384,27728 


Rulb. — Reduce  the  given   money  to  a  decimal  expression,  .and  multiply  by  the  price  ^ 
Rixdollar. 

To  reduce   Dollars   United   States   to  Rixdollars    it    is   evident  we  have  only  to  reverse  the 
operation,  tor  example  : — 

.7825)  3384,27728  (4324,955 
72 


1910 
6685 

68,7(iii 
5 

3,800 
Ans.     4,324  R.  D.,  08  grotes,  4  swares. 
QUESTIONS. 

1.  I  contract  a  debt  payable  to  Joseph  Steele,  of  London,  £504  10s.  3|d.,  exchange  on 
that  place  Ixin^r  81.084-      What  amount  must  1  place  to  his  credit  in  dollars  .' 

Notl.  A  foreign  debt  should  always  !»■  converted  into  dollars  at  the  current  rate,  so  as  to 
make  your  books  show  your  actual  Indebtedness,  which  is  of  course  what  it  will  then  cost  in 
dollars  to  pay  the  debt.     The  practice  of  recording  the  pound  at  $4.44  gives  useless  trouble. 

2.  J  owe  James  Brown,  London,  lor  net  proceeds  of  his  goods  sold  lure.  $5,987.50,  which 
1  desire  to  remit  per  bill  of  exchange  at  $1.00£,  taking  \  per  cent,  commission  tor  investing. 
"What  amount  of  Sterling  can  I  buy?* 

3.  John  Clarke,  Loudon,  owes  me  $15,341.24  for  goods  shipped  from  this  port  to  his  order, 
anil  he  authorizes  me  t«»  draw  on  him,  exchange  at  $1.09.1.  What  amount  of  sterling  must  1 
draw  lor  to  give  me  the  full  amount  of  my  claim  with  £  per  cent,  for  my  commission  I 

4.  Imported  merchandise  amounting  to  £324  10s.  7d.  on  the  other  side,  l'aid  here  lor 
duties,  charges,  &c,  $487.34.  How  much  per  pound  sterling  must  I  sell  these  goods 
for  to  gain  l\!'.  per  cent.,  and  what  must  I  charge  for  an  article  invoiced  at  3s.  0d.,  exchange 
being  al  $1.09£? 

5.  Imported  merchandise,  amounting,  after  deducting  2\  percent,  discount,  to  £58  1  I2e.  'id., 
exchange  at  $1.10.  Paid  for  duties,  &c,  on  this  side  $1,054.23.  Bow  much  per  pound 
sterling  must  I  sell  the  goods  for  to  gain  10  percent.?     How   much  must  1  sell  an  article 

for,  charged  in  the  invoice  7s.  (id.  ? 

o.    .lames  |\e||y,   Loudon,  owes  Ine  for    goods    sold    there    on    my    account    £120    l^S.    7.|d. 

What  shall  I  receive  in  dollars  in  payment  of  the  debt,  when  exchange  is  at  $1,094  ' 

7.  John  Brown,  London,  owes  me  £528  l<>s.  7d.  What  shall  I  realize  for  the  debt  in 
fedi  ral  money,  wh<  n  exchange  is  at  .!»s. 

John  Brown,  London,  owe.  M,e  $2,280.26,  which  he  desires  me  to  collect  by  a  draft  on 

him  when  exchange  is  at  Ml.      I  wish  to  know  what  amount  of  sterling  1  must  draw  a  bill  for 

ilize  the  debt  with  '.  per  cent,  commission  ! 

9,  I  owe  John  Brown  $2,280.26  for  goods  sold  here,  which   I  am  directed  to  pay  by 

remittance.      What  amount  of  Sterling  must  1  buy  so  as  to  charge  .1  per  cent,  commission  00 

the  amount  invested,  exchange  al  .i(7. 

•  I  munt  charge  Jnnii-s  Brown  tn 

•J'..  Ctuh  for  amount  Invi  itad  In  Hill  oJ  g">t>»f 

"     <    ■  •! II II 1 1 nnloll ,    \   |m  !    ,  .   nl    lO, 

*V*<7.50 

92 


SEC.  X.-FOREIGN  ACCOUNTS. 

10.  Sold  goods  for  A.,  of  Havre,  net  proceeds  $3,435.27,  which  I  am  to  invest  in  a  bill  ot 
exchange,  at  5.27  francs  per  dollar.  What  amount  of  francs  can  I  buy,  taking  \  per  cent, 
commission  on  the  amount  invested  ?     What  would  be  my  entry  ? 

11.  I  owe  B.,  of  Hamburg,  8342  Marcs  Banco,  12  schillings,  10  pfennings.  What  must  I 
pay  for  a  bill  on  Hamburg  of  that  amount,  when  exchange  is  32^  cents  per  Marc  Banco  ? 
What  would  be  my  entry  ? 

12.  C,  of  Amsterdam,  owes  me  10,842T\6„  florins,  when  exchange  is  40^  cents  per  florin. 
What  amount  of  dollars  shall  I  receive  for  a  bill  of  that  amount,  and  what  entry  shall  I 
make  ? 

13.  D.,  of  Bremen,  owes  me  $3,578.29  for  goods,  which  I  shipped  to  his  order  ;  I  am  to 
charge  \  per  cent,  commission"  for  negotiating  the  draft,  exchange  at  76'^  per  rix  dollar. 
What  amount  must  the  bill  be  drawn  for,  and  what  will  my  entry  be  ? 

14.  D.,  of  Bremen,  shipped  to  my  order  goods  amounting  per  invoice  to  8,342  rix  dollars, 
25  grotes,  3  swares,  for  which  I  paid  duties  and  charges  on  this  side,  $879.24.  How  much 
must  I  charge  for  an  article  invoiced  at  one  rix  dollar,  so  as  to  gain  12£  per  cent.,  exchange 
at  78i  cents  ? 

15.  United  States  6  per  cents  sell  in  London  at  102.  What  is  the  equivalent  rate  in 
Tsevv  York,  when  exchange  is  $1,094,  ? 

$100  -payable  in  United  States  sell  in  London  for  102,  by  which  is  meant  $102,  each  dollar 
being  ¥\  of  one  pound,  or  4s.  6d. ;  and  As.  6d.  payable  in  London  is  worth  $1.09^  in  New 
York. 

16.  United  States  6  per  cents,  with  two  months'  dividend  on,  sell  in  New  York  at  $lllf. 
What  is  their  equivalent  in  London,  exchange  on  that  place  at  $1.07i?  What  are  they 
worth  there  with  dividend  off? 

They  are  worth  that  sum,  which  with  l^per  cent,  added,  gives  $111.75.  With  dividend  off, 
they  are  worth  the  sum  which  at  the  same  premium  would  produce  $111.75,  less  the  dividend. 

93 


K_ 


SECTION     XI. 


COMPOUND    INTEREST. 


The  computation  of  compound  interest  is  tedious,  and  as  it  is  often  required  in  the  settling  up 
of  old  accounts,  as  well  as  in  other  financial  operations,  we  ofTer  the  following  abridgmi 

Multiply  the  principal  by  the  number  standing  opposite  the  number  of  years  required,  the 
product  is  the  amount  required. 


These  sums  are  the  compound 
interest  of  one  dollar  for  the 
several  numbers  of  years.  In 
some  arithmetics  the  table  ;s 
extended  to  thirty  years.  The 
object  of  introducing  it  here  is 
to  show  its  convenience. 


I.    IMPLE.   Required  the  compound  interest  of  $5,000  @  7  per   cent,  for  7  years.     -Si  at 
compound  interest  7  years  gives  as  above  $1.6057^ 

5.000 


Years. 

6  per  cent. 

1  per  cent 

1 

1.06 

1.07 

2 

1.1236 

1.1449 

3 

1.19101 

1.32504 

4 

1.26247 

1.31079 

5 

1.33822 

1.40255 

6 

1.41851 

1.5(1073 

7 

1.50363 

1.60578 

8 

1.59384 

1.71818 

9 

1.68947 

1.83845 

10 

1.79084 

1.96715 

$5,000  gives  5,000  times  as  much,  or  $8,028.90 


When  more  years  than  ten  are  required  the  number  corresponding  is  easily  found.  Thus 
for  15  years  we  take  10  and  5. 

The  number  opposite    5  is  for  7  per  cent.         1.40256 
u  (i  «         jo  "    "    "    "       "  1.96715 

15 

The  product  of  these  two  numbers,  or     2.75902 

is  the  number  answering  for  15  years.     For  18  years  multiply  the  numbers  opposite  10  and 
8,  or  the  number  opposite  9  multiplied  by  itself. 

The  object  here  is  merely  to  show  the  use  of  such  tables  ;  they  will  be  found  extended 
sufficiently  for  all  purposes  in  M'Culloch's  Commercial  Dictionary,  under  the  head  of 
'•  Interest  ami  Annuities." 


COMPOUND     DISCOUNT 

It  is  sometimes  required  to  find  the  presenl  worth  of  a  certain  sum  due  after  a  certain 
number  of  years  have  expired.     Por  example:  in  ten  years  I  shall   be  entitled  to  receive 

(16,000,  whal   is  its  prtsenl  worth,  interest  being  at  7  per  cent.  I 

Bj  table,  one  dollar  paid  now  Would  in    ten    years   amount    to    Nl.<ni71.r».      Then 

for.  every  1.96715  contained  In  15,000  I  am  entitled  to  receive  $1  at  present.     15,000  — 
1.96715  =  $7,625.24,  presenl  worth. 

94 


SEC.  XL-ANNUITIES. 

Rule.  Divide  the  principal  by  the  amount  of  $1  for  the  time. 

It  will  readily  be  perceived  that  this  rule  is  applicable  to  all  questions  involving  money 
due  in  prospective.  Thus  I  have  an  annuity  of  $500  for  life,  which  I  desire  to  sell  for  its 
present  value  at  7  per  cent.  ;  now  if  I  determine  that  my  expectancy  of  life  may  be  estimated 
fairly  at  fifteen  years,  the  question  arises,  how  much  would  this  annuity,  if  paid  into  a  bank, 
amount  to  at  the  end  of  fifteen  years.  This  being  found  (and  we  shall  show  the  process 
of  finding  it  hereafter),  we  have  only  to  apply  the  rule  for  finding  its  present  value.  Those 
who  reason  superficially  on  these  matters  are  apt  to  conclude,  that  because  compound  interest 
cannot  by  law  be  collected  on  an  outstanding  debt,  its  computation  is  not  a  practical  question. 
With  a  little  reflection,  however,  it  will  be  obvious  that  a  great  part  of  the  profits  of  all  large 
financial  institutions  arises  from  compound  interest  or  re-investment ;  the  law  does  not  say 
that  a  bank  shall  not  re-invest  what  it  receives  for  interest,  in  fact  all  banks  do  so  six  or 
eight  times  within  the  year;  and  hence  one  very  substantial  reason  for  preferring  short  paper, 
or  notes  of  two  months  to  those  of  eight  or  nine,  however  good  the  notes  may  be.  Notes  at 
two  months,  discounted  at  the  legal  interest,  7  per  cent,  per  annum,  would  give  the  bank  7  J- 
per  cent.,  the  £  being  gained  by  the  advantage  of  short  paper. 

The  law  against  compound  interest  may  sometimes  work  injustice  between  partners  in 
business,  as  is  shown  in  sec.  XI  [. 

ANNUITIES. 

Since  the  practice  of  life  insurance  is  becoming  so  general,  some  concise  and  simple 
method  of  arriving  at  the  real  value  of  an  annuity  must  be  desirable.  For  example  :  an 
insurance  company  offer  to  pay  at  my  death  a  certain  sum,  on  condition  that  I  pay  annually 
to  them  $100  so  long  as  I  live.  Now  estimating  my  life  expectancy  as  fifteen  years,  how 
much  will  my  payments  have  amounted  to,  for  whatever  they  give  me  less  than  this  is  their 
profit.     The  following  shows  the  amount  of  a  $1  annuity,  from  one  to  ten  years. 

ONE  DOLLAR  ANNUITY.* 


Years. 

6  per  cent. 

7  per  cent. 

1 

1.00 

1  00 

2 

2.06 

2.07 

3 

3.1836 

3.2149 

4 

4.37401 

4.43994 

5 

5.63709 

5.75073 

6 

6.97531 

7.15329 

7 

8.39383 

8.65402 

8 

9.89746 

10.2598 

9 

11.49131 

11.97798 

10 

13.1>079 

13.81644 

Now  if  we  require  to  know  the  amount  produced  at  the  end  of  seven  years  at  6  per  cent., 
by  an  annuity  of  $500,  we  find  by  the  table  that  a  $1  annuity  for  that  time  produces 
$8.39383,  which  X  500  ==  $4,196.91.  Or,  if  we  want  to  know  the  present  worth  of  the 
same  annuity,  we  must  find  what  sum  at  interest  for  seven  years  would  amount  to 
$4196.91.  By  the  table  of  compound  interest,  we  find  that  $1  in  seven  years  at  6  per  cent, 
amounts  to  $1.50363,  then  4196.91  -J-  1.50363  =  $2791.18.  The  proof  is  obvious. 
$2,791.18  improved  at  6  per  cent,  interest  would  in  seven  years  amount  to  $4,196.91,  and 
so  would  an  annuity  of  $500,  consequently  their  values  must  be  equal. 


*  This  table  is  made  from  the  previous  one,  as  follows : — The  first  term  of  the  previous  table  is  the  amount  of  $1,  1  year  ■ 
2d,  the  amount  of  $1,  2  years  ;  3d,  amount  of  $1,  3  years.  Now,  an  annuity  of  one  dollar,  three  years,  is  the  sum  of  these 
previous  terms  with  one  dollar  added. 

95 


SEC.  XL-ANNUITIES. 

QUESTIONS. 

1.  A  youth  had  a  legacy  bequeathed  to  him  by  his  uncle  of  $2,000,  which  has  been 
improved  at  6  per  cent  per  annum  since  he  was  twelve  years  old.  What  will  it  amount  to 
when  he  attains  the  age  of  twenty-one,  if  it  continues  to  improve  at  the  same  rate  ? 

2.  A  gentleman  is  entitled  to  a  legacy  of  $4,000  at  the  death  of  a  relative,  whose* 
expectancy  of  life  is  seven  years.      What  is  its  present  worth,  interest  6  per  cent.  1 

3.  A  father  wishes  his  son,  who  is  now  twelve  years  old,  to  have  $10,000  on  his  attaining 
the  age  of  twenty-one.  What  sum  must  he  now  invest,  so  that  improved  at  6  per  cent,  it 
will  amount  to  the  sum  require?  ? 

4.  A  gentleman  finds  that  he  can  save  annually  from  his  income  8200,  which  he  can 
improve  at  6  per  cent.      What  will  his  family  receive  at  his  death,  should  he  live  ten  yi 

5.  A  gentleman  has  82,036.16  to  pay  at  the  end  often  years,  without  interest,  and  wishes 
to  appropriate  annually  from  his  income  sufficient  to  pay  the  whole  debt  when  it  becomes 
due.     How  much  must  he  pay  annually,  interest  at  6  per  cent.  ? 

He  must  pay  annually  the  annuity  that  will  produce  in  ten  years  the  sum  required. 

6.  A  gentleman  is  in  receipt  of  an  annuity  of  §200,  to  cease  at  the  death  of  a  relative 
whose  expectancy  of  life  is  ten  years ;  he  wishes  to  sell  his  claim  to  it  for  its  present  value, 
what  sum  ought  he  to  receive  interest  at  6  per  cent.  ! 

7.  A  gentleman  coming  to  possession  of  an  estate,  finds  it  encumbered  with  a  debt  of 
$20,00<>,  which  he  determines  to  pay  off  in  seven  years,  interest  7  per  cent.  What  sum 
must  he  annually  apply  to  this  purpose,  so  as  to  effect  his  object  ? 

8.  A  father  offers  to  invest  $500  at  6  per  cent,  interest,  and  permit  his  son  to  take  the 
whole  on  these  conditions,  viz.  the  son  is  to  draw  out  annually  an  equal  sum,  and  to  exhaust 
the  whole  in  five  years.      How  much  may  he  draw  annually  ? 


*  For  (able*  of  Expectancies  see  McC'ulloch's  Commercial  Dictionary,  in  which  may  be  found  the  average  duration  of  life 
for  every  age  from  1  to  100. 

ne  may  !»•  coriotu  t<>  know  how  1 1 1  ■  -  --« ■  expectancies  are  obtained,  and  as  the  subject  is  generally  considered  acomplicated 
one,  we  ofler  the  following  as  a  simple  method  of  arriving  at  the  result. 

NORTHAMPTON   TABLE. 
Tulilc  of  Mortality,  showing  the  Number  of  Persons  alive  at  the  end  of  every  Year,  from  1  to  100  Years  of  .'igc,  out  of  1,000  born 

1  ox  ether. 


Ages 

\o.  Of 

Ages. 

No  of 

\-< 

No.  of 

Ages. 

No.  of 

No.  of 

V'.'es. 

No.  of 

Ages. 

No.  of 

Persons. 

Persons 

Persons. 

Persons, 

Persons. 

Persons. 

Persons 

l 

74:t 

16 

401 

31 

:s7n    i 

45 

'J7'.l 

5U 

18-2 

73 

85 

87 

9 

3 

825 

n 

1    . 

32 

364 

40 

J7-J 

(ill 

175 

74 

78 

7 

3 

582 

u 

4.VJ 

:i:t 

:i:>7 

47 

265 

III 

JO- 

7.-. 

71 

80 

5 

4 

553 

in 

446 

34 

351 

4ri 

259 

&i 

IT.  1 

76 

65 

'.in 

4 

5 

536 

20 

ill 

:r> 

344 

4'J 

359 

63 

154 

77 

58 

Bl 

3 

a 

52] 

21 

434 

36 

338 

.,ii 

345 

64 

117 

78 

99 

9 

7 

SOU 

22 

4-'H 

:i? 

331 

51 

938 

65 

III! 

79 

46 

93 

1 

8 

499 

23 

4JI 

38 

335 

.V2 

33J 

66 

133 

80 

411 

94 

1 

!» 

4'.IJ 

24 

4l.r> 

:iii 

318 

53 

33 1 

67 

196 

81 

:i:. 

Ml 

400 

•in 

312 

54 

•J  17 

119 

39 

30 

06 

11 

l-:i 

105 

■ii 

305 

310 

li!l 

US 

B3 

97 

19 

178 

27 

._.„, 

50 

903 

7(1 

106 

-l 

•-•ii 

B6 

i:i 

i;i 

28 

380 

4.1 

57 

196 

71 

99 

BS 

10 

99 

ii 

r,» 

:i-:i 

44 

985 

58 

189 

72 

09 

80 

19 

100 

13 

469 

30 

1 

376 

The  lota]  number  of  years  ol  life  to  I"-  enjoyed  by  the  1,000  born  amounts  to  25,678,  consequently  each  would  !»•  entitled  t>> 

i  the  number  that  died  each  year  all  died  ai  tl ud  of  the  >e.,r.    Assuming  (what  is  not  strictly  correct, 

however)  thai  the  deaths  of  any  one  yeat  would  average  the  middle  of  the  year,  we  should  have  i"  deduct  half  a  \  <  ir  for  every 
ili raiii  that  occurred.    Then — 


Total  Dumber  of  yean  to  i><-  lived 
Half  of  l.OOd  deaths  i cur     , 


500 


True  number  of  years  lived        ....       95,178+1000=85.18    y< 
ucyofa  healthy  riiiM  »t  iiirih. 

Tie  n  •'.  257  have  ilieil.  leaving  743  living,  an. I  the  niiinl.er  ..I' years  of  life  10  thl 

Tiien  i.ihhi    95]  ii  kves  1 1:1  deaths  to  occur,  for  which  deduct  half  as  before S71J 


96 


Expectancy  at  the  age  of  one  vmi 


SEC.  XI  -ANNUITIES. 

9.  A  gentleman  without  family  or  relations,  possessing  $10,000,  desires  to  purchase  an 
annuity  for  life.  His  expectancy  of  life  is  nine  years.  What  annuity  should  he  receive, 
the  rate  of  interest  being  7  per  cent.  ? 

10.  A  gentleman,  whose  expectancy  of  life  is  nine  years,  wishes  to  secure  to  his  family 
at  his  death  the  sum  of  $10,000.  How  much  should  he  pay  annually  during  his  life,  interest 
at  7  per  cent.  ? 

11.  A  gentleman  has  property  valued  at  810,000,  which  he  secures  at  his  death  to  his 
nephew,  on  condition  that  the  nephew  pays  him  annually  $500  during  his  lifetime.  His 
expectancy  of  life  is  nine  years.  What  annuity  is  the  legacy  worth,  interest  7  per  cent., 
and  what  is  the  annual  profit  to  the  nephew  if  the  uncle  live  exactly  nine  years  ?  What  is 
the  present  worth  of  the  legacy  ? 

12.  The  debt  of  the  city  of  New  York,  January  1st,  1849,  was  $11,621,232,  but  as  an 
offset  they  owned  $479,820.  How  much  must  be  appropriated  annually  to  pay  off  the  debt 
and  interest  in  ten  years,  interest  at  6  per  cent.  ? 

13.  A  company  of  two  hundred  persons  subscribe  $20,000,  in  shares  of  $100  each,  which 
they  invest  in  real  estate.  Their  property  has  so  improved,  that  it  now  produces  10i  per 
cent,  per  annum  interest  on  the  amount  invested.  What  must  now  be  given  for  a  share,  so 
as  to  realize  7  per  cent,  per  annum  1 

14.  I.  have  bought  the  bonds  of  a  company  at  such  a  rate  that  they  produce  me  10i  per 
cent,  per  annum  on  my  investment.  The  bonds  are  payable  in  ten  years  from  this  time. 
How  much  may  be  given  for  $100,  invested  so  as  to  realize  7  per  cent,  per  annum  ?* 

15.  I  pay  $70  for  a  bond  of  $100,  payable  in  ten  years,  and  bearing  interest  at  6  per 
cent.,  payable  annually.  What  profit  shall  I  make  per  cent,  per  annum,  provided  I  hire 
money  for  the  operation  at  7  per  cent.  ? 

16.  A  Railroad  Company  issues  its  bonds  for  $250,000,  payable  at  the  end  of  twelve  years, 
and  bearing  interest  6  per  cent.,  payable  annually. 

Jacob  Turnpenny,  having  lodged  securities  with  a  bank,  and  opened  a  credit  for  the  entire 
operation,  has  purchased  said  bonds  for  70  per  cent,  oi  their  face,  and  given  his  check  on  the 
bank  for  the  whole  amount  of  their  cost.  He  has  given  his  note  to  the  bank  for  the  amount 
thus  borrowed,  which  is  to  bear  interest  at  7  per  cent.  ;  and  he  proposes  at  the  end  of  each 
year,  after  receiving  his  dividends,  to  deduct  his  profits,  and  apply  the  rest  to  the  liquidation 
of  his  indebtedness.  For  the  balance  then  due  the  bank  he  gives  a  new  note  in  place  of  the 
old  one,  and  so  on  from  year  to  year.  But  the  first  year  having  nearly  elapsed,  he  desires 
to  know  how  much  per  cent,  on  his  investment  he  is  to  receive  for  his  profit. 

17.  How  much  per  cent,  of  their  face  may  Turupenny  sell  the  above  bonds  for,  so  as  to 
retain  all  his  profits  on  the  above  operation  ? 


*  This  will,  no  doubt,  appear  to  the  student  a  mere  repetition  of  the  previous  question,  but  a  little  reflection  will  lead  to  a  very 
different  conclusion.  According  to  question  13,  $]00  produced  $10i  per  annum  for  ever,  or,  as  it  is  termed  for  distinction,  in 
perpetuity  ;  but  f$100  invested  according  to  question  14  produces  J-ilO^  per  annum  for  ten  years  only.  It  is  true  that  if  we  give 
§150  for  $100  at  $10£,  we  should  receive  7  per  cent,  for  the  $150  during  the  ten  ye^irs ;  but  at  the  end  we  should  receive  back 
only  two  thirds  of  our  principal!  and  the  sum  we  ought  to  give  over  100  is  the  present  wurth  of  a  ten  years'  annuity  of  $3.50 
(worth  $124. 5b).    The  present  worth  of  this  bond  will  everv  year  diminish  until  the  last,  when  it  is  103.27. 

13  97 


SECTION    XII 


SETTLEMENTS. 

It  is  the  usual  practice  when  partners  do  business  on  unequal  advances  of  capital,  to 
credit  each  partner  with  his  capital  advanced  ;  and  at  the  end  of  each  year,  before  closing 
the  Interest  account,  to  credit  each  with  interest  on  whatever  amount  may  have  stood  at  his 
credit  when  the  books  were  balanced.  For  example  :  A.  and  B.  are  partners;  A.  having 
three  times  as  much  capital  as  B.  each  has  a  yearly  credit  passed  to  his  account  for  interest, 
thus  : 

Dk.         A.  Cr. 

1837. 

Jan.     1.  By  capital  advanced          .     860,000 

Dec.  31.  "    interest  current  year  .  4,200 

"       "  "     profits          "           "      .  10,000 

1838. 

Jan.     1.  "    interest  on  $74,200     .  5,194 

Dk. B. Cr. 

1837. 

Jan.     1.  By  capital  advanced  |20,000 

Dec.  31.  "     interest  current  year  .  1,400 

"  «  "  profits  "  "  .  10,000 
1838. 

Jan.     1.  "     interest  on  $31,400    .  2,198 

Now  had  A.  drawn  out  at  the  end- of  the  first  year  $2,800,  and  caused  the  entry  to  be 
made  on  the  books,  "  Paid  A.  one  year's  interest  on  his  surplus  capital,"  he  may  have  lent  it 
back  to  the  firm.  B.  has  in  this  way  no  room  for  objection  to  A.  drawing  interesl  annually 
on  his  surplus  capital.  But  let  us  suppose  the  account  were  left  open  for  twelve  yeffis,  \. 
neglecting  to  draw  the  interest  on   his  surplus  as  it  became  due,  and  each  partner,  in  the 

Usual  way  of  keeping  the  accounts,  having  been  annually  credited  with  interest  on  the 
amount  standing  at  his  credil  when  the  hunks  were  balanced.  Each  in  this  way  draws 
compound  interest,  and,  SO  far  as  their  capital  is  equal,  it  is  the  same  fur  one  as  the  other. 
But  it  makes  essential  difference  to  B.  whether  A.  draws  simple  or  compound  interest  on  his 
surplus,  for  if  the  compound  interest  on  the  surplus  is  4,000 
And  the  simple  interest       .  .  .  8,000 

Difference     .        .        1,000 

B.  would  gain  half  this  difference,  8500,  by  a  settlement  at  simple  interest,  and  the  law 
being  on  Ins  side  he  could  enforce  such  settlement.  \.  therefore  loses  this  (500,  by  merely 
nf glecting  to  draw  the  interest  on  his  surplus,  even  though  the  money  w»re  wanted   for  the 

business,  and  must  have  been  in diately  returned  as  a  new  kfen.     Partners   thus  trading 

on  unequal  advances  of  capital  would  do  well   t"   bear  in  mind,  that    in  case  of  death  their 
executors  would  he  compelled  to  adjust  their  aooounts  at  simple  interest,  and  that  all  difficulty 
is  obviated  by  drawing  out  annually  the  interest  on  the  surplus. 
98 


SEC.  XII— SETTLEMENTS. 

QUESTIONS. 

1.  William  Pay  well  and  Jno.  Swift  have  done  business  as  partners.  William  Pay  well 
advanced  on  account  of  the  business  $5,342.29,  which  being  averaged  takes  date  May  14th, 
1849,  and  he  received  from  the  business  $1,224.30,  averaging  July  12th.  John  Swift 
advanced  on  account  of  the  business  $3,824.32,  averaging  July  4th,  and  received  from  the 
business  $7,832.37,  averaging  August  1st.  They  divide  profits  equally,  each  being  allowed 
interest  on  money  employed.  The  above  facts  are  fully  agreed  upon  by  both  parties,  but 
they  are  unable  to  make  a  settlement.  How  do  accounts  stand  between  them,  or  what  must 
Swift  pay  Paywell,  January  1st,  1849,  interest  6  per  cent.  ? 

2.  James  Paton  and  Charles  Collins  are  about  to  dissolve  partnership,  January  1st,  1849. 
Their  affairs  stand  as  follows  :  They  have  cash  in  bank  $5,679.84,  bills  receivable  $6,430.22, 
averaging  due  April  1st,  1849.  Merchandise  valued  at  $14,000.  They  owe  on  their  own 
notes  $0,000,  averaging  due  Mar.ch  1st,  1849.  James  Paton  has  advanced  into  the  business 
$12,000,  taking  date  by  average  September  1st,  1848,  and  has  drawn  out  $3,840.24,  taking 
date  July  1st,  1848.  Charles  Collins  has  advanced  $4,000,  taking  date  March  1st,  1848, 
and  drawn  out  $2,000  taking  date  August  1st,  1848.  How  much  is  Charles  Collins  entitled 
to  receive  in  retiring  from  the  business,  interest  computed  at  6  per  cent.  ? 

5,679.84  Cash 

6,430.22  Bills  Receivable 

14,000.00  Merchandise 

3,840.24  James  Paton    .  .  12,000.00 

Bills  Payable  .  .  6,000.00 

2,000.00  Charles  Collins  .  4,000.00 

Profits     .  .  .  9,950.30 


$31,950.30  $31,950.30 


3.  John  and  Peter  bought  a  farm,  the  profits  or  losses  arising  from  which  they  propose  to 
divide  equally,  after  allowing  each  one  interest  6  per  cent,  on  his  money  employed.  They 
have  sold  off  a  part  in  small  lots.  The  rest  John  has  farmed,  and  they  have  expended  money 
for  improvements  and  buildings  thereon.  They  stipulated  that  John's  services  were  to  be 
valued  at  $200  per  annum  more  than  Peter's.  They  have  been  thus  engaged  one  year, 
commencing  January  1st,  1848.  They  kept  no  regular  set  of  books  ;  but  each  kept  an 
accurate  account  of  what  he  paid  out  and  received,  and  with  each  other's  account  they  are 
entirely  satisfied.  John  has  paid  out  $5,834.22,  taking  date  by  average  July  1st,  and 
received  $2,584.20,  taking  date  September  1st.  Peter  has  paid  out  $3,000,  February  1st, 
and  received  $284.25,  taking  date  May  1st.  They  now  propose  to  dissolve  partnership,  and 
John  agrees  to  take  the  farm  and  improvements  for  $7,500.  What  amount  must  John  pay 
Peter  in  settlement  ?  They  think  this  can  be  ascertained  without  writing  up  a  new  set  of 
books. 

4.  A  banking  institution  having  stopped  payment,  offers  the  following  statement  of  the 
condition  of  its  affairs  : 

Cash  on  hand  .  .  .  59,342.34  Capital  ....  250,000.00 
Bills  of  Exchange  .  30,000.00  Notes  in  circulation  487,340.00 
Notes  of  other  banks  .  150,000.00  Due  depositors  .  .  250,000.00 
Bills  Receivable  .  .  720,854.23  Reserved  fund  .  .  75,000.00 
Due  from  other  banks  12,500.00 
Expense  account  .  .  11,846.24 
Profit  &  Loss  .     .     .     77,797.19 


$1,062,340.00  $1,062,340.00 


It  is  estimated  that  the  probable  loss  on  collecting  assets,  and  the  expenses  of  liquidation, 
will  be  $62,000.     What  then  will  it  pay  on  the  dollar  to  its  stockholders  ? 

99 


SEC.  XII.-SETTLEMENTS. 

PARTNERSHIP    CHANGES. 

There  is  perhaps  no  department  of  book-keopini:  where  ingenuity  and  forethought  are  of 
more  value  than  in  laying  oul  a  plan  for  liquidating  an  old  business  through  the  books  of  the 
new  one.  Although  the  circumstances  under  which  these  changes  occur  vary  a  good  deal* 
the  following  embodies  sufficient  to  meet  all  the  real  difficulty,  in  nine-tenths  of  such  CM 

the  author  has  been  consulted  upon. 

Let  us  suppose  A.  and  B.  have  done  business  as  partners,  and  are  abou*.  to  dissolve,  the 
following  being  the  state  of  their  accounts  : 

Cash        .      .      .      .      .  3,7o0.84  Hills  Payable   .      .      .  11,849.00 

Bills  Receivable    .      .  15,399.00  Personal  Accounts      .  5,124J30 

Personal  Accounts     .  4,584.52         A 19,290 £6 

Merchandise  valued  at  24,509.50         B \  12,500.00 


$48,263.86  $48,263.88 


B.  now  proposes  to  retire,  A.  continuing  the  business,  and  liquidating  the  old  partnership. 

It  may  be  proper  to  remark,  that  in  this  stage  of  the  proceeding  the  partners  themselves, 
when  not  familiar  with  accounts,  are  almost  sure  to  clog  the  matter  with  unnecessary  or 
unmeaning  agreements.  For  example:  B.  proposes  that  A.  shall  give  his  note  for  one  half 
the  goods,  that  B.  shall  receive  half  the  debts  as  they  come  in,  and  pay  half  the  notes  as  they 
become  due.  Now  if  the  agreement  of  partnership  originally  provided  that  each  should  draw 
interest  on  his  account  current  with  the  firm,  and  take  half  the  profits,  that  agreement 
covers  the  whole  ground,  and  renders  all  such  provisions  as  the  above  as  absurd  as  paying  a 
bill  by  telling  out  separately  the  money  for  each  article. 

If  A.  takes  merchandise  he  is  charged  with  it.  as  any  other  person  would  be,  and  the 
concern  benefits  or  loses  by  the  sale,  according  to  the  price  estimated.  If  A.  gives  his  note 
to  B.,  then  B.  is  charged  with  that  note,  taking  date  when  it  matures.  B.'s  claim,  as  above, 
is  $16,500,  assuming  that  all  profits  have  been  posted  up,  and  the  accounts  balanced; 
and  B.  must  either  receive  from  A.  $12,500  out  of  the  present  assets,  with  interest  on  his 
account  while  open,  or  it  must  be  shown  by  A.  that  any  deficiency  resulted  from  a  loss  in 
which  he  participated.  B.  has  no  claim  after  the  $12,500  due  at  this  time  has  been 
accounted  for,  either  by  money  or  loss. 

It  may  be  very  important  to  A.  to  avoid  pacing  B.  in  advance,  but  it  must  be  borne  in 
mind  that  B.'s  account  is  kept  open  until  all  is  liquidated;  and  even  should  he  be  paid  at 
once  the  whole  -Si 2, 500,  he  would  at  the  end  be  called  upon  to  refund  the  interest. 

Now  for  the  entries  on  the  old  books.  A.  takes  to  account  only  the  cash  and  merchandise, 
and  the  entry  on  old  Journal  is  : 

New  Firm  to  Sundries. 

To  Cash  for  this  amount  taken  to  account          ....         3,750.84 
"    Merchandise  for  this  amount  on  hand 24,569.50 


$28,320.34 


So    the   Old    Firm   have    now    for   assets   the    same   amount    as   before,  bul    the    New    Firm 

appear  as  debtors,  instead  of  Cash  and  Merchandise.  And  as  all  notes  of  the  <  Hd  Firm  must 
be  liquidated,  the  New  Firm  may  at  once  assume  them;  ami  the  <  >ld  Firm  next  enters  on  its 
Journal  : 

Bill*  Payable  to  New  Firm. 

For  Balance  of  this  Account *ii,:ho 

Now  the  books  of  the  Old  Finn   maybe   left   in   the  Haiti  they   tie,  except  charging  or 
100 


SEC.  XII.-PARTNERSHIP  CHANGES. 

crediting  an  account  with  interest  or  loss,  until  the  New  Firm,  say  at  the  year's  end,  makes 
out  its  account  current  with  the  old. 

The  New  Firm  has  on  its  books,  then,  the  following  entries : 


Sundries  to  A.  fy  B.  (Old  Firm). 

Merchandise  for  goods  taken  to  account 
Cash        ...... 

A.  <$•  B.  to  Bills  Payable. 
For  Notes  of  Old  Firm     . 


24,569.50 
3,750.84 

11,349.00 


Let  us  now  suppose   a  year  to  have   elapsed,  and  the  New   Firm,  which  we   will  call 
A.  &  Co.,  makes  out  for  the  Old  Firm  the  following  account  current : 


Dr. 


A.  &  B.  ii?  Account  Current  and  Interest  Account  with  A.  &  Co.         Cr. 


1848. 

Jan.  19.  To  your  notes  averag- 
ing due  this  date     . 

Feb.  15.  To  amount  paid  on 
Personal  accounts 
with  int.  thereon     . 

June  1.  To  Amount  paid  B.  on 
acct.  by  our  note, 
due  this  date 

Dec.  31.  To  Interest  to  date  on 

debit 

"       "    To  New  Account     . 


11,349.00 


5,311.54 


10,000.00 

1,268.49 
21,865.08 


1848. 

Jan.     1.  By  Cash     ....  3,750.84 

"       "  "    Merchandise  .     .  24,569.50 

Feb.  28.  "    Notes      collected 

aver'g  this  date    .  15,369.00 

May    1.  "    Accts.  collected  3,500.00 

Dec.31.  "    Int.  to  date  on  Cr.  2,614.77 


794.11 


Personal  Accounts  paid  .  .  .  5,124.30 

Interest  thereon      .  .  .  187.24 

Amount  charged  as  above      .         .  .       $5,311,54 

Personal  Accounts  received  .         .         4,584.52 

Interest  thereon      .  .         .  150.00 

4,734.52 
Loss 1,234.52 

Amount  received  and  credited  above       .       83,500.00 

Now  we  make  from  this  document  the  proper  entries  in  the  old  books  : 

Sundries  to  New  Firm. 

Personal  Accounts  for  this  amount  paid  5,311.54 

B.  for  amount  paid  him  on  account        .       10,000.00 
Interest   for  this  amount   due    them   on 

above  payments    ....  1,268.49 

$16,580.03 


,794.11 


Interest  to  Personal  Accounts. 

For  this  amount  due  on  sundry  accounts  at  settlement 


$187.24 

101 


SEC.  XII.-PARTNERSH1P   CHANGES. 


New  Firm  to  Sundries. 

To  Bills  Receivable,  notes  collected 
"    Personal  Accounts,  amount  collected 
"    Interest     .         .         ... 


15,359.00 
3,500.00 
2,61  1.77 

|21,473*.77 


Personal  Accounts  to  Interest. 

For  interest  due  at  settlement  ..... 

Profit  fy  Loss  to  Personal  Accounts. 

For  this  amount  lost  ....... 

The  accounts  of  Old  Firm  on  old  books  now  stand  thus  : — 


10,000.00 

21,865.08 
1,455.73 
1,234.52 

$34,555.33 


Cash         . 
Bills  Receivable 
"     Payable    . 
Personal  Accounts     . 

B 

A 

New  Firm    . 

Interest 

Profit  and  Loss 


balanced. 


$150.00 
11,234.52 


12,500.00 

19,290.5(3 

2,764.77 


$34,555.33 


We  now  add  the  following  Journal  entries — 

Interest  to  Profit  fy  Loss. 
For  balance  of  this  account   . 

Profit  Sf  Loss  to  Sundries. 

To  A 

"   B 


$1,309.04 


37.26 

$74.52 


And  now  the  open  accounts  are — 

21,805.08         .  .         New  Firm 

10,000.00  B 

A 


131,865.08 


12,537.26 
19,327.82 

n:U.s(35.08 


B  now  draws  out  the  balance  of  his  account,  which  the  new  firm  pays  and  enters  on  its 
books. 


A  Sr  B  to  Cash. 

Paid  B  his  claim  on  Old  Firm  in  full 

We  also  enter  on  old  books — 

B  to  New  Firm. 

For  balance  of  his  account    . 
102 


$2,537.26 


*^37.26 


SEC.  XII.-PARTNERSHIP  CHANGES. 

To  close  the  old  Ledger  we  have  only  to  enter — 

A  to  New  Firm. 

For  his  interest  transferred  to  New  Books        ....       $19,327.82 

On  New  Books  the  account  with  Old  Firm  stands  thus — 

A  $  B. 

To  Cash  paid  B  .     .     .       2,537.26         By  Bal.  of*  old  account  .     21,865.08 
"    Bal.  to  A's  credit     .     19,327.82 


$21,865.08  $21,865.08 


On  the  Journal  of  the  New  Books — 
A  Sf  B  to  A. 

For  bal.  transferred  to  his  credit,  being  his  capital  brought  from  Old  Firm,  $19,327.82 

Thus  the  whole  is  liquidated,  and  interest  has  been  adjusted  on  all  matters  of  account  with 
the  Old  Firm,  and  A.  stands  credited  in  the  New  Books  with  his  claim  on  the  concern. 

So  far  we  have  given  only  an  outline ;  we  will  add  a  few  entries  to  exemplify  the  process 
of  carrying  it  out  in  the  New  Books. 

The  New  Firm  pay  a  note  of  the  Old  Firm         ....         $1,000 

Entry. — Bills  Payable  to  Cash. 

For  John  Doe's  note  to  Old  Firm  due  this  day     ....  $1,000 

Note. — The  Bills  Payable  were  taken  to  account,  and  are  therefore  treated  in  every 
respect  as  their  own  Notes. 

They  receive  Cash  for  a  Note  due  Old  Firm,  $2,500. 

Entry.— Cash  to  A  8?  B  (Old  Firm). 

For  Richard  Roe's  note $2,500 

Note. — The  Notes  Receivable  were  not  taken  to  account,  and  are  therefore  credited  to 
Old  Firm. 

They  receive  $800  in  compromise  of  a  note  of  Old  Firm. 

Entry. — Cash  to  A  8f  B. 

For  Thomas  Carpenter's  Note  of  $1,500 

Less  loss  .........  700 


Note. — This  loss  may  at  any  time  be  entered  on  books  of  Old  Firm,  thus  : 

Profit  8f  Loss  to  Bills   Receivable. 

They  receive  a  debt  from  G,  $1,526.50. 

Entry. — Cash  to  A  8f  B. 

For  Balance  due  from  G.  on  old  books       .....  1500.00 

Interest  to  date         .........  26.50 


$1,526.50 


Note. — An  entry  would  now  be  made  on  Old  Books. 

G.  to  Interest $26.50 


103 


SEC.  XII.-SINGLi:  ENTRY. 

The  New  Firm  has  obtained  money  by  having  sold  some  of  the  Old  Firm's  notes. 
Cash  received  .....         6,350 

Discount         .         •  •  •  80.J> 


$5,480.25 

Entry. — Cash  to  A  8f  B. 

For  Notes  of  the  Old  Firm  discounted,  averaging  due  April  12th  .     §5,430.25 

Interest  to  Cash. 
For  3  mos.  discount  on  Old  Firm's  notes ' •'-•> 

They  pay  expenses  for  business  of  Old  Firm. 

Entry. — A  Sf  B  to  Cash. 

For  expenses  on,  &c.        ........ 

These  will  be  found  to  comprehend  most  of  the  entries  required,  and  to  one  who  has 
mastered  the  subject  properly  there  cannot  be  the  least  difficulty  in  carrying  out  the  plan  ; 
but  to  such  as  have  not  studied  accounts,  ami  have  merely  picked  up  a  little  of  the  routine 
of  someone  set  of  books,  we  can  only  say,  if  this  explanation  appears  complicated  and 
unintelligible,  it  will  become  perfectly  plain  by  studying  the  book  from  the  beginning.  This 
is  a  part°of  the  subject  that  can  only  be  made  clear  and  simple  to  those  properly  instructed. 

SINGLE    ENTRY     ACCOUNTS. 

As  the  question  will  doubtless  be  asked  why  we  have  introduced  Single  Entry  after 
Double,  it  will  be  proper  to  give  our  reason  for  it.  We  admit  that  books  may  !><•  kept  by 
single  entry  by  those  unacquainted  with  the  principles  of  double  entry,  but  the  mere  keeping 
of  accounts  is  not  all  that  is  required.  The  simplest  settlement  of  Partnership  accounts 
involves  the  principles  of  double  entry,  and  when  the  commonest  English  education  includes  a 
knowledge  of  Arithmetic,  Mensuration,  and  often  Algebra  and  Geometry,  it  surely  ought  to 
include  a  knowledge  of  accounts  sufficient  to  make  a  partnership  settlement  between  two 
mechanics.  Is  it  not  a  pitiful  position  for  a  youth  who  can  compute  to  a  fraction  the  value 
of  a  life  annuity,  or  perhaps  even  the  orbit  of  a  comet,  to  be  compelled  to  acknowledge  his 
entire  incompetency  to  effect  a  settlement  between  John  Doe,  the  farmer,  and  Richard  Roe, 
tli-  miller,  in  a  matter  of  some  lew  hundreds  of  dollars  ? 

We  think  it  will  soon  be  deemed  as  essential  that  a  youth  should  understand  accounts  as 
that  he  should  have  studied  Grammar  or  Geography,  or  any  other  useful  branch  of  know- 
ledge, and  that  Arithmetic  with  single  entry  to  help  it  does  not  suffice  to  secure  this  know- 
ledge', will  be   readily  admitted   on   reference*  to  the  few  simple  questions   under   the    head 

■TTLEMBHTS." 

If  these  reasons,  then,  justify  us  in  assuming  that  the  principles  of  double  entry  should  be 
taught  to  all,  the  time  spenl  in'u  riting  up  single  entry  accounts  is  wasted  ;  it  is  something  like 
learning  architecture  by  beginning  with  a  hog-pen.     Single  entry  can  he  adopted  at  once  by 

one  acquainted  with  the  principles  ofdouble. 

Single  entry,  according  tome  popular  understanding  of  it,  is  a  mere  record  of  personal 
indebtedness,  but   it   may  also   include  the  accounts  of  Cash,  Bills   Receivable,  and    Bills 

Payable.     The  three  latter  accounts,  however,  are  seldom  posted  to  the  Ledger.     'I'll'  I 

is  'entered  on  a  Cash  Book,  and  is  thus  a  BUOStitUte  for  the  Ledger  account,  and  a  Bit] 
Book  answers  the  same  purpose  as  Bills  Receivahle  and  Hills  Payable  accounts,  hut  tin- 
secondary  accounts  are  all  dispensed  with. 

Single  entry  is  practised  under  as  great  a  variety  of  forms  as  double.  \  professional  man 
would  be  satisfied  with  having  accounts  thai  would  simply  show  who  was  indebted  to  him. 
and  whom  be  owed.  A  Ledger  would  therefore  be  the  only  book  he  would  need.  It  should 
have  an  alphabetical  index,  so  that  he  oould  turn  to  anj  person's  account,  and  charge  or 
credit  him  as  the  case  may  require.  The  best  size  is  a  small  octavo  volume}  the  left  hand 
104 


SEC.  XII.— SINGLE  ENTRY. 


page  being  taken  for  the  Debit  side  of  the  Account,  and  the  right  for  the  Credit,  so  as  to 
give  room  for  entering  particulars.  Those  who  are  more  methodical  will  keep  also  a  small 
Cash  Book,  in  which  they  will  record  every  sum  of  cash  received  and  paid.  It  shows  how 
money  is  gone  out,  and  for  what  purpose  ;  and  if  necessary  or  desirable,  an  inside  column 
on  the  Credit  side  may  be  made  to  show  any  particular  class  of  expenses. 

A  small  retail  dealer,  or  tradesman,  would  find  it  requisite  to  keep  a  Day  Book,  in  which 
he  would  make  his  entries  before  passing  them  to  the  Ledger.     For  example : 

New  York,  January  1st,  1849. 


Ledger  fol. 


John  Franklin,  Dr. 
For  1  pair  pants 
"     1  coat 


7.00 
22.00 


2d. 


James  Coleman,  Cr., 
For  12  yards  Super.  Black  Cassimere  @  $2       24.00 
"    20     "  "  "      Cloth  (cb,  $5     100.00 


29 


124 


00 


00 


These  are  posted  to  their  proper  accounts  in  the  Ledger,  and  the  cash  received  or  paid  on 
account  is  either  posted  from  the  Cash  Book  or  first  entered  on  the  Day  Book. 

A  farmer  should  keep  accounts  of  some  kind.  Few,  however,  would  be  at  the  trouble  of 
keeping  more  than  a  Cash  account  and  Ledger ;  but  one  who  has  acquired  at  school  as  much 
knowledge  of  the  principles  of  accounts  as  is  comprised  in  the  previous  exercises  in  this 
book,  will  have  no  difficulty  in  adopting  such  a  course  as  answers  his  purposes  ;  he  cannot 
fail  to  see  the  advantage  of  sometimes  introducing  on  his  Ledger  an  account  of  some 
particular  class  of  expenditures,  with  the  proceeds,  so  that  he  may  arrive  at  the  result, 
whether  profit  or  loss.  He  may  cultivate  a  field,  for  example,  on  some  particular  plan,  and 
would  therefore  introduce  on  his  Ledger  an  account  of  that  field,  with  the  outlay  on  the  Debit 
side  and  sales  on  the  Credit. 

105 
14 


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